The law of divided co-ownership (commonly known as condominium) is relatively young. Until 1969, the Quebec Civil Code contained no provisions pertaining to co-ownership other than undivided co-ownership, i.e. ownership by several persons of the same immoveable as opposed to ownership by several persons of parts of the immoveable. The amendments brought to the Civil Code that year have corrected this void. Construction of condominium buildings immediately became very popular in urban areas.
But for a few exceptions, issues of liability did not emerge immediately. This came later. With the aging of existing condominium buildings and the ever present desire of syndicates to keep condominium fees as low as possible, we are currently seeing an explosion of liability claims by and against syndicates of co-owners. In fact, the evolution of the law of liability of syndicates and co-owners is almost as rapid today as the explosion of the condominium market was 40 years ago. New principles and trends are being established and it is likely that we have not yet seen the end of the road yet. One of the numerous areas of development is the right of subrogation of the insurer of the syndicate. The Quebec Court has had the occasion of rendering an interesting judgment on this issue in GCAN Compagnie d’Assurance c. Khalifeh (C.Q. Montréal n° 500-22-136994-079, judgment rendered on September 22nd, 2008, by the Honorable Alain Breault, J.Q.C.).
GCAN Cie d’Assurance and Missisquoi Cie d’Assurances (the Insurers) were the insurers of a condominium building situated in Montreal. The by-laws of the building stipulated that each owner had to obtain liability insurance coverage for an amount of at least $ 1 000 000.
One of the co-owners rented his unit to the Defendant Khalifeh. As the owner did not reside in Canada, he was represented by two agents, Co-Defendants Promanac Services Immobiliers (1992) Ltd. and Canada Land Ltd.
A fire originating from the rented unit caused damage to the building. The Insurers indemnified the syndicate, their insured, and subsequently sued Khalifeh, Promanac, Canada Land and Aviva Insurance Company in its quality as insurer of the co-owner. Against Khalifeh, the Insurers alleged that she was responsible for the fire. As against Promanac, Canada Land and Aviva, the Insurers alleged that they were liable towards them for the value of the damage to the building because they had failed to require from the tenant that she get liability coverage, which would have allowed the Insurers to be paid the amount of the judgment in the event they were successful against Khalifeh (the tenant was allegedly not insured).
Promanac, Canada Land and Aviva each filed a Motion to dismiss the Insurers’ action. The motions were upheld in a judgment rendered on September 22nd, last. The judgment, well reasoned and substantiated, was based on the following considerations.
Firstly, the Court noted that the declaration of co-ownership edicted that the building insurer must waive its rights of subrogation against the (translation) “named insureds, co-owners, administrators of the property, their agents, employees or other representatives acting in the scope of their administrative functions”. Moreover, the Insurers’ policy included a waiver of subrogation clause against (translation) “the administrators, agents or employees of the co-owners, all co-owners and other members of their household”. The Court ruled that these “unequivocal” waivers prohibited the Insurers from suing the coowner. The action against the co-owner’s insurer, Aviva, was therefore dismissed.
As for Promanac and Canada Land, the Court ruled that they had committed no fault or negligence since the by-laws of the building made it mandatory for co-owners, not tenants, to obtain liability coverage. The co-owner, Aviva’s insured, obviously had liability coverage since his own insurer was being sued. But there was no obligation for a tenant to be properly insured. As Promanac’s and Canada Land’s obligations did not go beyond those of the co-owner, their liability was not involved.
The Court added that the waiver of subrogation contained in the Insurers’ policy applied in any event to the owner’s agents. Therefore, even if one took into consideration the provisions of the declaration of co-ownership which force each co-owner to ensure that their tenants respect the provisions of the declaration of co-ownership (such that the tenant would have had to obtain liability coverage), the agents would not be more liable.
Finally, the Court also upheld the motion for the reason that there was no link between the damage paid by the Insurers and the alleged negligence. There is a fundamental principle of liability law that requires that there be a link (a “causal link” or a “link of causality”) between the alleged negligence (here the fact that the Defendants did not force the tenant to obtain liability coverage) and the damage. The causal link in this case was inexistent. Liability coverage would have contributed in the Insurers receiving payment of the eventual judgment but it had no effect on liability, i.e. the fire itself and who caused it.
Without question, insurance is helpful in making sure that a defendant is capable of paying the amount of the judgment. But such insurance coverage changes nothing insofar as liability is concerned.