June 28th, 2020 - The law concerning co-ownership insurance has undergone major changes since June 2018. Section 1070 of the Civil Code of Quebec now contains a third paragraph, which provides that the syndicate keeps a sufficiently precise description of the private portions available to the co-owners, for insurance purposes, so that the improvements made by the co-owners are identifiable. The same description may apply to several portions when they have the same characteristics.
This description, which acts as a reference unit, must be recorded in the condominium register, so that the co-owners who request it can consult it. This new paragraph of section 1070 is directly related to the syndicate’s obligation to insure the entire building, including the private portions, except any improvement made to it (undersection 1073 of the Civil Code of Quebec). For all co-ownership established since June 13th, 2018, this new provision came into effect on December 13th, 2018. Those created before June 13th 2018 are subject to this since June 13th, 2020.
The objective is to avoid confusion in case of a disaster, as to who pays what in terms of compensation. The main problem was who, between the syndicate's insurer and the co-owner concerned, had to pay for certain damages, such as those caused to hardwood floors or oak kitchen cabinets. Claims adjusters often wondered whether such damaged equipment was original (basic), or whether it was an improvement. Clarifying in this regard was often complicated, so conflicts between claims adjusters were frequent, delaying compensation payments.
Lawyer emeritus Yves Joli-Coeur warns the syndicates of co-owners who have not yet produced this description. "They have an interest in doing it now, otherwise, in the event of a loss, the consequences could be severe," he says. And for good reason, since, in the absence of a description of the private portions, a syndicate should therefore insure the entire building (including improvements made to the private portions).
However, if a syndicate of co-owners has not produced a reference unit, it is unlikely that it would have the reconstruction value of its building reassessed in light of these improvements. So it could end up in a state of under-insurance. If this is the case, the personal liability of the directors concerned could be committed. It should be noted that their insurance policy for errors and omissions would not indemnify them.
In conclusion, if the improvements to the private portions cannot be identifiable, the co-owner's insurer could refuse to pay, in the event of a claim, for improvements that could have been made to private portions. It would therefore be up to the syndicate's insurer to compensate for any damage to the building, including those caused by improvements to a private portion.
Montreal, June 28, 2020
By François G. Cellier for Condolegal.com