Deconstructing Insurance Coverage

May 2023

Insurance claims in high-rise communities become complicated since at least two insurance companies are often involved.  Here we look at how one water damage claim occurred and why the full amount of damage was not recoverable for one condo owner.

A unit recently completed renovations.  Unknown to them a nail went into a water pipe creating a hidden water leak.  The owners were unaware of this but the unit below had problems soon after.  Beads of moisture were first seen on the ceiling.  Soon after water came pouring down damaging walls, floor and personal possessions.  Total repair costs were $20,000.  Less than half of this amount was recovered through insurance.

The owner undertaking renovations and the one with water damage were both insured.  The owner with water damage had coverage for up to $100,000 in damage and a $2,500 deductible.  They chose not to purchase coverage to cover the corporation’s deductible which is $10,000.

In high-rise living fault is not always a factor so only the owner with water damage filed a claim.  They file with their insurance company which then files against the condominium corporation since the damaged pipe constitutes a common area.  In practice, condominium corporations can and often do reduce the cost of insurance coverage by accepting a dramatically higher deductible of $50,000, $100,000 or more.  Unit owners have the option of ensuring any deductible of the corporation’s insurance policy is covered by their insurance.

Here is how it breaks down

Total damage costs $20,000
Personal insurance deductible $2,500
Corporation insurance deductible $10,000
Recovered by corporation insurance $7,500
Amount received by claimant $7,500

Had the damage not impacted on common areas, the corporation’s insurance coverage would not have applied.  The owner would have collected an additional $10,000 toward repair and replacement costs.

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