Changes to the BC Strata Insurance Crisis

On August 14, 2020, the BC provincial government passed legislation to lessen the impact of insurance challenges faced by strata corporations and owners. The legislation addresses several issues surrounding insurance renewals and increased risks and costs in the insurance market. Unfortunately, we don’t know yet how or when the insurance industry will respond.

In the interim, strata corporations in BC remain in an awkward situation because of their obligation to insure the full replacement value of all buildings, common assets, and fixtures held in the strata when there are no mandatory requirements for the insurance companies to provide insurance, maintain competitive cost, cover all risks, or even provide full replacement coverage for these items.

Additionally, there has been criticism regarding the practices of insurance brokers. These concerns are also being addressed through the legislative amendments. The revisions require brokers to now disclose the amount of their commissions and to notify strata corporations sooner and more extensively of changes to insurance coverage and costs, including an intent not to renew. The revisions also prevent brokers from paying commissions or fees to strata-management agencies representing other parties.

Government Response to the Crisis

As of August 14, strata corporations are required to let strata owners know as soon as is feasible when there is a change to the corporation’s insurance deductible or any other material change.

Furthermore, if an immediate expenditure is necessary to obtain the required insurance, strata corporations can now use their operating or contingency reserve fund to pay for the required property and liability insurance without a vote of the owners.

Other changes will be brought into force at a later date. These changes will achieve the following:

  • set out clear guidelines for what strata corporations are required to insure to help strata councils make informed decisions on their insurance policies;
  • protect strata unit owners against large lawsuits from strata corporations if the owner was legally responsible for a loss or damage but it occurred through no fault of their own;
  • identify the circumstances, if any, when stratas are not required to get full replacement value insurance coverage;
  • strengthen depreciation reporting requirements, including limiting the ability of strata corporations to avoid completing depreciation reports;
  • change the minimum required contributions made by strata unit owners and developers to a strata corporation’s contingency reserve fund; and
  • prohibit the payment of referral fees between insurers or insurance brokers and strata property managers or other third parties not licensed as insurance agents (recognizing that this practice only occurred with some strata property managers).

Stricter regulation; increased transparency around reporting, commissions, and disclosure; and changes to enhance the owners’ responsibilities will all work to improve the strata insurance market. For more information on the BC strata insurance crisis and what Waypoint can do to help you as an owner, give us a call anytime at 310-8442 or send us your comments. +