A strata corporation’s obligation to insure is not a covenant, it is a legislated requirement, but some of the issues are the same. Orange Julius et al v. Surrey et al, 2000 BCCA 467, at paras. 34 and 35 found "it is the terms of the covenant to insure, and not the terms of the insurance coverage actually obtained, that must determine the scope... there would have no insurance coverage at all where the loss suffered was less than the amount of the deductible... It requires insurance coverage in an amount not less than the property’s replacement value, nowhere does it need only obtain insurance coverage for losses exceeding a certain amount.
In the whole of the circumstances it is clear to me that it doesn't matter what the deductible is, if the loss is a named peril an owner is entitled to make a claim on the strata's insurance. The insurance company should then manage the claim from the very beginning and arrange for an insurance investigator to determine its value. That is the insurer's job, not the strata's.
Again, note the material difference between a Deductible and a Self-Insured Retention (SIR) plan.
SIR is defined as a dollar amount specified in a policy that must be paid by the insured before the insurance policy will respond to a loss. In contrast, under a policy written with a deductible provision, the insurer pays the costs associated with a claim on the insured’s behalf and then seeks reimbursement of the deductible portion from the insured. https://www.alignedinsurance.com/self-insured-retention/
That is why the SPA specifies that the deductible is a common expense and, when necessary, automatically triggers a special levy without requiring a vote of approval. If your strata's Financial Statements and AGM budget do not include a line for insurance deductibles, do you know why? If the strata's policy is worth $2 million with deductibles of $200,000, it may be underinsured for full replacement value by more than $200,000 in the event of multiple claims. If so, is it part of a pattern of misrepresenting or offloading responsibility that carries on, year after year? How many strata lots are left unrepaired as a result? Time does nothing to heal that situation, it just goes from bad to worse.
Under the SPA the strata corporation is not responsible to repair water damage to a strata lot, the insurance company is, but the strata must insure it and reimburse the insurer, and it cannot chargeback the deductible amount to an owner without a court order. For that reason it is important not to allow the strata to offload that burden of proof, so take care to guard against the strata interfering with a valid claim by making repairs to your strata lot, particularly if the loss is less than the deductible amount.
In constrast to a strata's deductible plan, a SIR policy puts much of the management of claims in the hands of those who can handle paying out early costs from their own pocketbook. For example, if a policy has a $1 million limit and a $100,000 SIR, you’ll need to pay for the first $100,000 of any claim before your insurer begins to cover the claim. In a deductible-based plan with a $1 million limit and $100,000 deductible, the strata's insurance company would pay for any claims starting at the first dollar until the policy limit, and would later bill the strata for up to the $100,000 deductible. In a SIR Policy, you pay up-front and also manage the claim up to the SIR amount, because the insurance company doesn’t play any role in a claim until the SIR is exhausted. In fact, for a claim that is lower than the SIR amount, generally there is no need to even inform your insurance company about the claim. A SIR Insurance Policy offers a lower rate on premiums, however, it does require that you have enough expertise and capital to fund the SIR and pay out the claims. If you typically face less than 20 to 25 claims per year, a high-deductible policy is recomended over SIR insurance. https://advisorsmith.com/what-is-self-insured-retention-insurance/
A SIR, refers to the amount that an insured has to pay in order for an insurance policy to kick in. Whereas an insurance deductible is included in the policy limits, a self-insured retention amount is not payable by the insurance provider. Without an underlying policy, you usually need to provide a SIR from $500 to $1 million. http://www.insuranceqna.com/commercial-and-business-insurance/self-insured-retention-sir.html
SIR is defined as a dollar amount specified in an insurance policy that must be paid by the insured before the insurance policy will respond to a loss. In contrast, under a policy written with a deductible provision, the insurer would pay the costs associated with a claim on the insured’s behalf and then seek reimbursement of the deductible portion from the insured. https://www.alignedinsurance.com/self-insured-retention/
Full replacement value insurance for common property and multiple units with a deductible amount that the strata has to sue to recover is inconsistent with SIR. The strata corporation is not an insurer: the amount of the deductible is not a Self Insurer Retention, the insurer must pay the claim and get reimbursement of the deductible from the strata.
Westsea Construction Ltd. v. Billedeau, 2010 BCPC 109 (CanLII), <http://canlii.ca/t/2b8q7
[58] The question of a loss falling within the
deductible was addressed in the case of Lincoln Canada Services LP v. First
Gulf Design Build Inc. (2007) O.J. No. 4167. The court held that:
34. I agree. Once a party has agreed to obtain
insurance, the amount of that deductible is a matter between the party and its
insurer and should not change the allocation of risk as between the parties to
the lease. Many factors affect the amount of the deductible and the other
party should not be in a position of having its exposure fluctuate depending on
the size of the deductible.
35. To hold otherwise would create great uncertainty
for a landlord or tenant. It would never really know what its exposure for a
negligent act might be. It would always need to know what the deductible was
in the other party’s insurance policy. That would not accord with commercial
reality. Once the parties have agreed on insurance for a specified loss, the
matter should end there.
[65] The risk of loss by water overflow, even if
caused by the negligence of the Defendant Lessee in failing to act in a timely
fashion, is a risk that the Lessor covenanted to insure against under the terms
of Lease. Absent express provisions of the Lease, for the reasons aforesaid,
the Defendant is not liable to indemnify the Lessor for the cost of repairs falling
within the insurance deductible. A decision of the United States District Court for the District of South Dakota, Western Division, BY Development, INC. v. United Fire & Casualty Co., 2006 U.S. Dist. LEXIS 14703, aff’d 2006 U.S. App. LEXIS 32442 (8th Cir. S.D., Dec. 4, 2006), found that the 72 hour waiting period was not a deductible, and was similar to a self-insured retention, which is “an amount that an insured retains and covers before insurance coverage begins to apply”.
Miluzzi v. York Condominium Corp. No. 60, 1996 CarswellOnt 3939 (Small Claims), found that replacement cost insurance can exist with a deductible provided the deductible is reasonable in the circumstances in light of the prior history of claims.
Stevens v. Simcoe Condominium Corp. No. 60, 1998 CarswellOnt 3808 (Ont Ct. of Justice), allowed a strata with responsibility bylaws to recover the amount of a deductible from a unit owner responsible for the loss so long as the deductible was reasonable. It was common ground between the parties that “insurance…against major perils to the replacement cost” is invariably subject to a deductible expressly provide in legislation as a matter of reality and the prevailing practice in the insurance industry to shift the deductible portion to the party causing the loss as a means of disciplining insurance claims.
The Owners of Strata Corporation VR2673 v. Comissiona et al, 2000 BCSC 1240, found the strata could claim back the deductible from a negligent owner under principles of common law, which s.158 preserves.
Strata Plan KAS 10199 v. Keiran, Simkus and Wawanesa, 2006 BCPC 360, found the owner responsible to pay back money the strata paid in reliance on section 158 for repairs in respect of water damage from a pipe the owner is personally responsible for. 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 homeowner's policy, rather than “additional coverage” for a deductible.(at paras. 15-16)
