Like any moral or physical person, a syndicate of co-ownership may engage its civil liability. The Law and the vast majority of declarations of co-ownership require that every syndicate subscribe insurance covering its civil liability towards third parties.
The object of the coverage
This insurance is crucial to the protection of the co-ownership and of the individual co-owners. It covers the collectivity of co-owners – against third parties claims – including any claim by the co-owners or occupants of the immovable.
The insurance subscribed by the syndicate covers the risks associated with the common portions of the immovable (such as: the inadequate snow removal of a sidewalk or slippery stairs) or damage caused by its employees (such as: the janitor or manager) in the performance of their duties. It protects the syndicate if it is held responsible for having caused a prejudice to a third party, including property damage or bodily injury. As it is the case with any insurance policy, be aware of exclusions.
Amount of coverage
The insurer must indicate the amount of coverage in the civil liability policy. Sometime, the declaration of co-ownership imposes a minimum amount of coverage. This amount may become obsolete if the declaration of co-ownership is not recent.
In addition to the usual exclusions, this type of civil liability insurance generally excludes any damages resulting from insufficient coverage in the policy of the syndicate such as an insufficiency resulting from a declared value inferior to the reconstruction cost of the building. If the syndicate has to rebuild, in totality or partially, each co-owner will have to contribute its own funds to cover the difference between the indemnity paid by the insurer and the reconstruction cost.
Failure to insure the civil liability of the syndicate
The failure to subscribe civil liability insurance coverage can have serious consequences for the syndicate, the co-owners individually and the members of the Board of Directors.
If it is sued successfully and must indemnify the victim, the syndicate will support, on its own, its legal fees and Court costs.
Even though a syndicate of co-ownership has its own patrimony, the Law provides that if a judgment is rendered against the syndicate, the financial liability of the co-owners is engaged, at least for a portion. The party who has a judgment against the syndicate can execute his judgment against each person who was an owner of a private portion, at the time when the cause of action as arisen, proportionally to the relative value of his fraction.
Any director is personally liable if he does not act with care and diligence in the execution of its mandate. The failure of the syndicate to subscribe civil liability insurance can render the members of the Board of Directors personally liable.
WHAT YOU SHOULD KNOW! Under the provisions of the civil liability insurance policy, the insurer can be compelled, under certain conditions, to pay the legal fees and court costs incurred in the defense of the syndicate if a civil liability lawsuit is instigated against it.
WHAT TO KEEP IN MIND: In all cases, the Board of Directors should retain the services of a competent insurance professional. The latter will be able to recommend an amount of coverage commensurate with the insured risks.
WARNING! The civil liability insurance coverage of the syndicate is to be distinguished from director’s liability insurance. The directors should not confuse the two coverages and think wrongly that if they are held liable, they will be covered by the insurance of the syndicate. Failing subscribing a specific coverage for the directors, they will not be protected.
CONSULT THE PUBLICATION: Condo Insurance: Everything you should know at pages 40 and following.