Insurance Changes Coming to the Strata Property Act

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The British Columbia Law Institute published a report earlier this year that could have several significant impacts on Strata Corporations throughout the province.  We have reviewed their report and tried to break out the most important recommendations they’ve made to the provincial government, which will likely result in at least some amendments to the Strata Property Act (the “SPA”).  We recommend reviewing the report in depth, however below we’ve included below notes on some of the more important subjects of conversation.

You can review the whole report here: https://www.bcli.org/wordpress/wp-content/uploads/2019/03/Insurance-Issues-for-Stratas_Report.pdf

Some of the key recommendations they’ve made include:

  • Mandate Directors and Officers (“D&O”) insurance, with a minimum value of $2,000,000. Currently, D&O insurance is not mandatory. Stratawest already undertakes through our Agency Agreement to assist with placing and maintaining Strata Council Errors & Omissions (E & O) insurance with a minimum coverage of $2,000,000, which for this discussion is different in name only. E & O insurance is to protect a party from legal responsibility due to unintentional errors, omissions and mistakes made during the course of a business transaction and/or the Directors and Officers (the Strata Council and their representatives including the Strata Manager) from liability due to the decisions they have to make and actions they have to take in the course of carrying out their duties;
  • Not to mandate earthquake insurance. The committee found that such a mandate would be too expensive and onerous on small Strata Corporations, and that there is a significantly uneven distribution of risk throughout the province which makes such a mandate problematic.  They also stated that there would be impacts on the insurance industry if earthquake insurance becomes mandatory, i.e.. prices could go up because the insurers know it’s not an option.  No clients within our portfolio in the Lower Mainland are without EQ insurance and this is unlikely to have an impact on our region as having EQ insurance is the norm;
  • Not to mandate flood insurance (similar reasoning as EQ insurance, and similar lack of importance to most of our clients as having flood insurance is the norm);
  • Land Title Office Liens should be allowed for a chargeback of an insurance deductible if the chargeback has been found valid by a court, an arbitrator or the Civil Resolution Tribunal. Currently, liens are only permitted (essentially) for Strata Fees and Special Levies owing to a Strata Corporation;
  • Chargebacks of an amount up to the insurance deductible of the Strata Corporation should not need a specific bylaw or court judgement to be upheld, it would be built right into the SPA. Currently there is a patchwork of provisions on this point and many Strata Corporations find that their bylaws are not quite in keeping with the most recent legal decisions, thus their claims for reimbursement after losses emanating from a Strata Lot are sometimes denied;
  • A new standard bylaw (which Strata Corporations can delete or amend, but it would become the default) should be added which requires Owners to carry insurance for the assessment of a deductible back to them, even if they don’t have any other property insurance (we view this as a very positive development as it’s a major source of contention);
  • Tri-Yearly insurance appraisals would become mandatory (many people are of the belief that it’s currently mandatory, but that’s not the case- it’s just typical/customary for well run Strata Corporations);
  • That appraisal should be shared with the Owners “as soon as feasible” if it’s a material change, especially if deductibles are increased (likewise we view this as very positive for consumers);
  • Further study should be done on the idea of implementing a “standard unit” definition in the Act, which is typical in some other provinces but is contrary to some of the fundamental principals of the SPA.  We can’t delve get into this one too much because it’s probably the most complicated of the recommendations, but such a change would have fundamentally transformed how Strata Corporations operate in BC.

We hope that you find this information helpful.  There is no timeline associated with the adoption of these recommendations, but we’ll continue to post updates to the legislation as they arise.