Condominium corporations are facing increasing challenges as insurance premiums continue to rise. In response, many corporations are exploring ways to mitigate these costs, including seeking recovery from unit owners whose actions may have contributed to premium hikes. Some condominium declarations contain provisions that pass on the increase to the corporation’s insurance premiums in certain circumstances, allowing corporations to pass on increased costs to an owner whose act or omission led to the higher premium. However, enforcing these provisions is complex and requires careful consideration.
Can Condominium Corporations Recover Increased Insurance Premiums from Owners?
For a condominium corporation to successfully hold an individual unit owner responsible for an increase in insurance premiums, it must establish a clear and direct link between the owner’s actions and the insurers decision to raise rates. This is often difficult, as insurers consider multiple factors when adjusting premiums, such as:
- Industry-wide trends in claims and risk assessment.
- The overall claims history of the corporation.
- The frequency and severity of claims within the property.
To demonstrate that a single owner’s actions directly resulted in a premium increase, the corporation would need to prove a sequence of events such as:
- The corporation receives an insurance quote but has not yet accepted it.
- A specific unit owner’s act or omission leads to an insurance claim.
- The insurer, upon learning of the claim, withdraws the original quote and issues a higher one.
- No other claims or external factors contributed to the insurer’s decision to increase the premium.
Because insurance pricing is complex, pinpointing a single claim as the cause of a premium hike is extremely difficult. Even if multiple claims were made by different owners, insurers rarely provide a detailed breakdown of how each claim affected the final premium.
Key Considerations
While it is understandable that the board of directors may want to minimize financial burdens on responsible owners, attempting to recover increased insurance premiums from specific individuals carries legal and practical risks. Courts are likely to demand clear, indisputable evidence linking an owner’s actions to the higher premium. Without such proof, pursuing recovery could lead to disputes and legal challenges.
Instead of relying on the premium increase provisions in a condominium declaration, board members and condo managers should focus on proactive risk management strategies, including:
- Implementing a Standard Unit By-law to clearly define insurance responsibilities and reduce disputes. This could also include looking at existing Standard Unit By-laws that may be in place and making revisions to shift the insurance responsibility for more standard unit items from the corporation to the unit owner.
- Enhancing property maintenance and safety protocols to prevent common claims such as water damage or fire.
- Exploring alternative insurance options with brokers to secure more competitive rates.
- Educating unit owners on best practices to minimize risk, such as proper appliance maintenance and water leak prevention.
The Bottom Line
While rely on premium increase provisions in a condominium declaration may seem like a solution to rising insurance costs, enforcement is rarely straightforward and often difficult to justify legally. Board members and managers should carefully weigh the risks before pursuing recovery from unit owners. Instead, investing in risk management and preventive measures can lead to long-term cost savings and a more sustainable approach to managing rising insurance premiums.
