Insurance Deductibles By-laws – Will Existing By-laws be Grandfathered?

There’s been considerable dialogue across Ontario on the following:  When Section 105 of the Condominium Act is amended, condominium corporations will no longer be able to pass Insurance Deductibles By-laws.  But what about by-laws passed before then?  Will those existing by-laws still be effective?  Will they be “grandfathered”?

My answer to this question is:  Maybe; but I don’t think so.

In my view, the amendments to Section 105 of the Act are clear:  Insurance deductibles by-laws will no longer be effective after the amendments to Section 105 come into force.  Put simply, the amended Section 105 says that the corporation’s deductible is a common expense except in certain specific circumstances listed in the Section – and a by-law is not one of the circumstances.  [As our readers will know, one new exception will be an amendment to the Declaration.]

The bottom line is as follows:  For insured events that occur after Section 105 is amended, I don’t see how a by-law can have any effect on responsibility for the corporation’s deductible.

HOWEVER:  According to the draft new Regulations, the information to be contained in Periodic Information Certificates (to be issued by condominium corporations) will include the following:

If an insurance policy obtained and maintained by the corporation in accordance with the Act contains a deductible clause that limits the amount payable by the insurer, a statement that,

(i) describes any such deductible clause, including the portion of a loss that would be excluded from coverage,

(ii) clearly identifies, for any such deductible clause, the maximum amount that is to be added to the common expenses payable for an owner’s unit under section 105 of the Act or as a result of a by-law passed under clause 56 (1) (i) of the Act before the repeal of that clause came into force, and

(iii) warns owners of their liability as described in subclause (ii).

This is unquestionably confusing.  Why refer to insurance deductibles by-laws in Periodic Information Certificates if such by-laws will no longer be effective?

I think there may be two answers:

(a) Insurance deductibles by-laws will of course continue to apply to any insured events that occurred before the amendments come into force. Adjusting those “pre-amendment losses” may take some time; and

(b) The amendments to Section 105 are not expected to be part of the planned First Phase of the amendments (whereas Periodic Information Certificates ARE expected to be part of the First Phase). Therefore, insurance deductibles by-laws may still be effective for some time to come – ie. until Section 105 is ultimately amended.

The Canadian Condominium Institute is checking with the province to see if the confusion can be resolved.

In the meantime, what should a condominium corporation do?

If you don’t currently have an Insurance Deductibles By-law, I suppose you could consider passing such a By-law.  The by-law certainly will be effective until Section 105 is amended.  And the by-law might continue to be effective after Section 105 is amended. But I have two cautionary notes:

I. Again, I think there’s a real possibility that such by-laws will have no further effect after Section 105 is amended.

II. Owners might be reluctant to consider passing a by-law that might soon be ineffective.

Stay tuned to Condo Law News for more blogs about amendments to the Condominium Act.