Clark Wilson LLP Insurance Bulletin
Case Law Review Archive
ALL WET: WHO IS "RESPONSIBLE" FOR STRATA DEDUCTIBLES
The Strata Property Act:
Section 149(1) of the Strata Property Act requires a Strata Corporation
to obtain and maintain property insurance on: "(a) common property,
(b) common assets, (c) buildings shown on the strata plan, and
(d) fixtures built or installed on a strata lot, if the fixtures are
built or installed by the owner developer as part of the original
construction on the strata lot." Further, Section 258 of the Act
provides that:
(1) Subject to the regulations, the payment of an insurance deductible
in respect of a claim on the strata corporation’s insurance is a common expense to be contributed to by means of strata fees
calculated in accordance with section 99(2) or 100(1).
(2) Subsection (1) does not limit the capacity of the strata
corporation to sue an owner in order to recover the deductible
portion of an insurance claim if the owner is responsible for the
loss or damage that gave rise to the claim.
Therefore, a strata corporation has the capacity to sue an owner to
recover their insurance deductible if the owner is "responsible" for
the damage. However, the Act does not define the word "responsible" and
confusion arose as to when precisely an owner will be considered
"responsible". Did "responsible" imply some legal criteria such as
negligence or was it akin to strict liability.
In hearing Appeals from two Provincial Court decisions, the British
Columbia Supreme Court has addressed this quandary.
Mari v. OSP LMS 2835 (2007 BCSC 740)
On July 2, 2004, water damage totalling $9,888.86 was sustained to
Strata Corporation Building. It was conceded that the damage was
caused by a faulty water level switch in the washer contained within
the unit owned by Carlo and Cathy Mari.
The Strata Corporation's insurance covered the damage but the Strata
Corporation sought to recover their deductlible of $5,000.00 from the
Mari's. The Strata Corporation had a bylaw which provided that:
"The insurance deductible costs are the responsibility of the strata
owner"
At trial in the Provincial Court the Mari's argued that the word
"responsible" in section 158(2) of the Act, required a finding of
negligence. Ultimately, the Provincial Court disagreed and the Strata
Corporation was successful in assessing the deductible against the
Mari's. The focus of the Appeal in front of Mr. Justice Burneyeat of
the British Columbia Supreme Court was on the interpretation of the
word "responsible" used in s. 158 (2) of the Act.
The Provincial court had adopted the definition of "responsible" as
applied by Mr. Justice Tysoe, in the decision of Beazer East Inc. v.
B.C. (Waste Manager) 2000 BCSC 1698, at para 111:
I also believe in using the word "responsible", the Legislature
intended to include persons who brought about an operation in the
sense of causing the operation to be carried on or carried out. Such
a person would be responsible for the operation because, but for the
actions or decision of that person, the operation would not have
been carried on or carried out. This is consistent with the second
definition of the word "responsibility" which I quoted above from
the Concise Oxford Dictionary (namely, "being the primary cause").
As a result the Provincial court held the Mari's responsible for the
loss as they were "clearly the people who allowed or 'caused' the washer
to be used".
On Appeal to the British Columbia Supreme Court Mr. Justice Burnyeat
was unable to find that the Provincial Court Judge made an error in
principle or that his decision was clearly wrong and in doing so held
that:
[12] I am satisfied that the legislation is clear and that no finding of negligence is required. The Legislature used
the term "responsible for" in s. 158(2) rather than terms such
as "legally liable, liable, negligent"
It is important to note that Mari did not address the recovery of the
deductible portion from an owner's own insurance policy.
Wawanesa v. Keiran (2007 BCSC 727)
The Strata Corporation claimed against unit owners for damages which
occurred as a result of a burst pipe behind the wall of their unit.
The water damage was caused by the failure of a "coupling" within the
wall due to high acid levels in the local water and not to any
negligent act or omission of the owner. There was no common property
damage however the damage was to fixtures within the owner's unit.
The damage was repaired by the Strata Corporation at a cost of
$3,787.80. The Strata Corporation's insurance policy contained a
deductible of $ 10,000 and as such no insurance claim was made and the
Strata Corporation pursued the owners directly for recovery.
The owner's insurer, Wawanesea paid the Strata Corporation $2,500.00
of that amount representing the policy limit for coverage in the case
of liability of a owner for an assessment in respect of any insurance
deductible of the Strata Corporation. The Strata Corporation sought
to recover the balance of $1,287.80 plus costs from the owners.
The Provincial Court started by noting that:
Under the bylaws of the strata corporation, the corporation is
responsible to repair and maintain common assets, common property,
building structures and exteriors. This provision corresponds with
the obligations of a strata corporation under the Strata Property
Act, S.B.C. 1998, c. 41. The bylaws hold owners responsible for
repair and maintenance of their strata lot, other than repair and
maintenance for which the strata corporation is responsible.
The Provincial Court went onto find that the owners were "responsible"
for the loss and held that:
[8] The Strata Property Act, S.B.C. 1998, c. 43, provides in section
158 that the deductible is a common expense, but that a strata
corporation is not barred from recovering the cost from an
owner who is "responsible for the loss". As I have noted, because
the damage occurred within the unit and not to common property, this is a situation where the homeowner had the duty to
repair
and maintain and is therefore "responsible for the loss",
regardless of the absence of fault or negligence on their part.
In this sense, the matter may be viewed as if there were no strata
corporation involved.
Whether the repairs were paid as part of
the deductible under the policy, or otherwise, they relate to damage for which in my view, under the Act and bylaws, the owner
is responsible. There would arguably have been no legal obligation
on the strata corporation to pay for the repairs, absent the duty
under the bylaws to insure against it.
The Provincial Court thus ground the authority for repayment of the
Strata Corporation not in any deductible bylaw but rather in the
by-laws requiring an owner to repair and maintain their own unit.
However, it is arguable that, despite the Provincial Court's analysis,
there really is no requirement that an owner be found "responsible"
under s. 158 of the Act in order for a Strata Corporation to recover
for damages paid out in relation to property which the owner had the
duty to maintain and repair.
The Provincial court in Kieran went onto address the issue of coverage
under the owner’s insurance policy with Wawanesa. Wawanesea had paid
out their policy limits of $2,500 under the strata deductible section
which provided:
Additional Coverages
We will pay up to $2,500 for that part of an assessment made
necessary by a deductible in the insurance policy of the Condominium
Corporation.
However, the Provincial Court went onto consider the section of the
Policy immediately before the above, which provided that:
If you are a condominium unit owner, we will pay for an additional
amount of up to 250% of the amount of insurance on Coverage C
personal property (Coverage C here is $33,500) of your share of any
special assessment if:
(1) the assessment is valid under the Condominium Corporation's
governing rules; and
(2) it is made necessary by a direct loss to the collectively
owned condominium property caused by and Insured Peril in
this policy.
Wawanesa argued that the loss was properly characterized by being
"made necessary" by a deductible in an insurance policy of the strata
corporation and as such the policy limit of $2,500 applied. However
the Provinical Court disagreed holding that:
[16] As noted above, however, this is not an assessment for damage
or loss to common property, but for damage in respect of
which an owner is personally and primarily responsible. It is
not "made necessary" by the strata corporation’s deductible,
rather by the fact of the owner’s primary responsibility for
damage to the owner’s unit. It would therefore be an insured
peril, under Coverage C, section (8) "Water escape, rupture, freezing..." of the Wawanesa Policy, rather than "additional
coverage" for a deductible assessment.
As such, the Provincial Court found coverage for the additional
$787.80 owed by the owner (subject to the $ 500 deductible). It
appears that the that the court confuses "insured peril" [ie
water] with insured property. While argued on appeal, the issue
of coverage was not included within Mr. Justice Burnyeat's reasons.
As such, it remains a Provincial decision only and of questionable
future authority.
Conclusion:
As a result of the Mari decision, a system of essentially strict
liability has been approved for the recovery of an insurance
deductible from the owner of a strata unit where the damage
originated. Any Strata Corporation bylaw allowing for the recovery
of an insurance deductible from an owner on such a strict liability
basis will be valid and enforceable against the owner.
The only clear authority resulting from Mr. Justice Burnyeat’s
decision in Kieran is that when a owner's unit sustains damage
to fixtures which are insured by the Strata Corporation, the owner
will be automatically held to be "responsible" for such damage and
required to reimburse the Strata Corporation. This appears to be so
regardless of whether there is a bylaw downloading an insurance
deductible onto the owner or not.
The full text of Mr. Burnyeat's reasons in Mari can be found here:
www.courts.gov.bc.ca/jdb-txt/sc/07/07/2007bcsc0740.htm
The full text of Mr. Burnyeat's reasons in Kieran can be found here:
www.courts.gov.bc.ca/jdb-txt/sc/07/07/2007bcsc0727.htm
If you have any questions about strata deductibles or any other
insurance matter, please contact Krista Prockiw (telephone
604-643-3105 or e-mail kxp@cwilson.com) or any other member of the
Clark Wilson LLP Insurance Practice Group.
