Insurance of divided co-ownerships: principal amendments to the Civil Code of Québec
This article first appeared in French in the Winter 2020 edition of the Copropriété Plus magazine.
Did you know that several sections of the Civil Code of Québec1 concerning the insurance of divided co-ownerships have recently been amended or will soon be amended?
On June 13, the Québec National Assembly adopted the Act mainly to improve the regulation of the financial sector, the protection of deposits of money and the operation of financial institutions2 (hereinafter “Bill 141”) aimed at reforming the laws governing the financial sector.3 Some of the provisions regarding insurance for divided co-ownerships came into effect on July 13, 2018, while others will be phased in gradually4. Bill 141 also provides for the adoption of regulations by the government to implement some of these new measures regarding divided co-ownership insurance.
The Act provides, in particular, that:
- co-owners are required to take out liability insurance, the minimum amount of which will be determined by regulation;
- the co-ownership syndicate is required to set up a self-insurance fund whose specific purpose is the payment of deductibles provided for by the insurance policies it takes out, and is also required to specify the rules for contributions to the self‑insurance fund and the building insurance;
- the government is empowered to legislate the conditions applicable to such contributions and insurance5.
In this article, we present the principal amendments to the Civil Code of Québec regarding the insurance of divided co-ownerships, including the new obligations of co-ownership syndicates regarding property damage repairs or claims.
I. Syndicates’ duties regarding the insurance of divided co‑ownerships
The amendments made to sections 1071 and 1073 C.C.Q. by Bill 141 amend the framework of the duties of the syndicate relating to the insurance of divided co‑ownerships6.
- Risks covered
The syndicate of co-owners has an insurable interest in the entire building, including the private portions. Accordingly, certain identified risks are deemed to be covered unless the insurance policy expressly and in clear lettering lists the excluded risks. The amendments provide that the risks automatically covered will be determined by regulation7.
- Amount of insurance
According to the new section 1073 C.C.Q., the amount of insurance coverage should be sufficient to cover the reconstruction of the building in accordance with applicable standards, usage and accepted practice. This amount must be reassessed every five years by a member of a professional order to be designated by government regulation8.
- Liability of the board of directors of the syndicate of co-owners
The board of directors of the co-ownership syndicate must be covered by third-party liability insurance. Also to be covered are syndicate managers, the president and secretary of the annual general meeting of co-owners, and other individuals in charge of ensuring the smooth running of the meeting9.
- Co-owners’ self-insurance fund
The co-ownership syndicate must set up a contingency fund as well as a self-insurance fund that is liquid and available on short notice10.The self-insurance fund must be used to pay the deductibles provided for in the insurance policy taken out by the syndicate. It shall also be used to compensate for damage to property in which the syndicate has an insurable interest in cases where the contingency fund or an insurance indemnity cannot provide for it11.
The contribution of each co-owner to the self-insurance fund must be based on the amount of the deductible payable by the syndicate and provide for a reasonable additional amount to cover the other expenses for which it is constituted12.
- Duty to provide insurance coverage
Each of the co-owners must take out third-party liability insurance, the minimum amount of which will be determined by regulation13.
II. New duties regarding property damage repairs or claims in the event of a loss
The new sections 1074.1 to 1074.3 C.C.Q. set out new duties regarding compensation or claims by the syndicate of co-owners for eventual damages to property.
When a loss involves property covered by an insurance policy taken out by the syndicate of co-owners and the syndicate decides not to avail itself of this insurance, it must ensure that the damage to the insured property is repaired14.
However, the costs incurred by the syndicate for the payment of deductibles and the repair of damage caused to the property in which the syndicate has an insurable interest may not be recovered from co-owners otherwise than by their contribution to the common expenses, subject to the damages that the syndicate may obtain from the co-owner at fault in cases permitting it15.
Conclusion
Directors of co-ownership syndicates should review the co-ownership’s insurance needs and obtain advice from an insurance professional, even if a number of the amendments discussed in this article have yet to come into effect.
It is worth noting that this reform also has an impact on insurers, who will have to alter their practices to comply with the new provisions, both in terms of underwriting and claims management.
1 C.Q.L.R. v. C.C.Q.-1991.
2 2018, chapter 23.
3 Ibid., Explanatory notes.
4 Ibid., s 814.
5 Ibid., Explanatory notes.
6 Ibid., ss 639 and 641; the amendments made to section 1073 C.C.Q. by section 641 of Bill 141 will enter into force following the publication of a regulation made under the third paragraph of that section.
7 Ibid., Secs. 639 and 642; the amendments concerning the self-insurance fund will enter into force 24 months after the publication of a regulation made pursuant to the third paragraph of Section 1073 C.C.Q. It should be noted that the first regulation must be published no later than June 13, 2020.
8 Ibid.
9 Ibid.
10 Ibid., section 639.
11 Ibid.
12 Ibid.
13 Ibid., s 637; it should be noted that the entry into force of these provisions is conditional on the adoption of a regulation to be published no later than June 13, 2020.
14 Ibid., s 642.
15 Ibid., ss 639 and 642.