When a condominium corporation suffers damages covered by a policy of insurance, the insurer repairing the damage will pay to fix the damages covered but not for the deductible. The corporation should try to ensure that payment of the deductible is made by the party responsible.
A deductible might range anywhere from $2,500 to $75,000, depending on the claims history in the building. The amount of the deductibles will have been negotiated and fixed at the time the policy was signed. Smaller deductibles are not necessarily better - some corporations choose larger deductibles in order to get a lower price for the insurance policy. The deductible can also vary depending on the cause of the damage. For example, where the deductible for general property damage is $5,000, the deductible for flood damage might be $10,000.
But what happens when multiple units are damaged at the same time? The insurer may take the position that there must be a separate deductible for each damaged unit or area. The payment of multiple deductibles is a serious concern as it could outweigh any benefit derived from the insurance policy. Before agreeing to pay more than one deductible, a condominium corporation should check with its insurance counsel to determine if it should accept this.
We recently dealt with a situation where two dozen condominium units were damaged during a spell of stormy weather. The damage occurred because a contractor performing repairs to the exterior of the building failed to protect the building, permitting water to enter a number of units. The corporation’s insurance broker initially suggested that the insurer might demand payment of the $5,000 deductible for each of the 24 units, i.e. demand payment of $120,000 towards a deductible. The insurance company later indicated that it might demand payment of a separate deductible for each separate storm which contributed to the water damage.
Insurance policies usually state that a deductible must be paid for each separate “occurrence”. The questions that needed to be answered were (1) whether water entering one unit was a different “occurrence” than the water entering the unit next door; and (2) whether the water entering the building on day one of the bad weather constituted a different “occurrence” than the water entering the building on the second day.
In our opinion, only one deductible was payable in those circumstances. The “occurrence” which caused the damage was the contractor’s failure to put up protection. All of the damage caused by the contractor’s negligence was therefore part of a single event, even though the damage from that negligence may have spread over multiple days and units.
When determining if single or multiple deductibles are payable, look to the cause of the damage. The rule of thumb is that if only one act or item caused the damage, it is likely that only a single deductible will be payable. Even where multiple acts or items caused the damage, a single deductible may only be payable where those acts and items can be linked together in a common enterprise.
We note that the comments in this article speak to wording typically found in insurance policies purchased by condominium corporations. Each policy of insurance is governed by the wording contained therein. If your policy of insurance contains wording different to that found in policies we have dealt with, the comments in this article may not apply to your policy of insurance.