There are more than 13,000 condo corporations in Ontario, and some 70,000 people serve as members of their boards. With disputes ranging from special assessments to construction deficiencies and even human rights claims, lawsuits involving condo corporations are on the rise in Ontario. It's more important than ever to ensure that your condominium corporation has a robust legal defence insurance policy.

Adequate coverage protects against the legal challenges that can emerge during daily operations. In co-ownership, the risks of litigation and disputes are generally higher than in other housing types. This is because co-owners often misunderstand their rights and obligations, resulting in disputes among owners or the condo corporation. Conflictual situations are numerous and include the irregular use of common portions, inadequate allocation of common expenses, and disputes relating to general meetings or board decisions. And as some disagreements take years to resolve, legal costs are sure to mount.

In this article, we explore three key types of coverage—Commercial General Liability, Directors and Officers Insurance, and Legal Expense Insurance—and how they can safeguard your corporation from potential legal woes. It is worth mentioning that many condo insurance policies can differ, so having an educated conversation with your insurance broker can enhance the corporation’s legal protection.

Commercial General Liability

A Commercial General Liability (CGL) policy is an essential safeguard for any condo corporation. This coverage protects the corporation, its employees (and should include property managers), and volunteers against third-party claims involving property damage, bodily injury, or personal injury. Given the high volume of visitors daily, contractors, and residents interacting with condo properties, the likelihood of an incident is significant. Without adequate liability coverage, a single lawsuit from a slip-and-fall accident, property damage, or defamation could lead to an overwhelming legal and financial burden. This policy helps ensure that legal defence and settlements are managed, allowing the corporation to continue operations without facing potentially devastating costs.

Under Ontario's Condominium Act (Section 102), condo corporations are legally required to maintain liability insurance to cover risks arising from property ownership and daily operations. This mandate includes coverage for liabilities related to the use of common areas, machinery, and other operational assets. By ensuring they meet these requirements, corporations can protect against financial and legal risks that may arise from accidents or damage on the premises, which are often unpredictable and potentially costly. However, the specific protections offered by each CGL policy may differ, so it’s important to understand what your coverage entails.

Directors and Officers Insurance

While CGL insurance primarily safeguards the condo corporation, Directors and Officers (D&O) Insurance plays a vital role in protecting property managers, management firms, employees, volunteers, and current and former board members. This insurance shields these individuals from lawsuits from decisions or actions taken in their official capacities.

Notably, Section 37 of the Condominium Act establishes that directors must act in good faith, exercise honesty, and demonstrate the care, diligence, and skill that a reasonably prudent person would exhibit in similar circumstances. D&O insurance should indemnify directors, provided they have acted within the bounds of their responsibilities.

Additionally, a well-rounded D&O policy should include coverage for human rights complaints and defence costs. With a growing number of human rights complaints in condominium management, including discrimination and harassment claims, directors and officers face significant potential liability. D&O insurance can assist in alleviating the financial and emotional burdens of defending against these claims, allowing leaders to focus on the well-being of the condominium community. Again, all insurance policies can differ, making it essential to consult with your insurance broker to ensure all points are covered in your policy.

Legal Expense Insurance

CGL and D&O Insurance are commonly recognized pillars of Condominium Corporation Insurance. Legal Expense Insurance (LEI), while less frequently discussed, is equally important as it can address some coverage gaps between CGL and D&O policies. LEI typically provides condo corporations with resources to manage various legal challenges, including access to legal advice, contract disputes, and property protection.

An LEI policy may include access to a 24/7 legal helpline, allowing condo corporations to receive general legal assistance and guidance on various matters. However, the availability of this feature varies among insurers. While most legal expense policies will not respond to the judgement awarded, many will assist with the costs throughout the legal process through the courts, such as medical report costs or court fees. Specific coverages available can differ across insurers, so it is essential to review what each policy entails.

The typical range of coverage under LEI includes:

• Legal Defence
• LEI may cover legal defence costs when condo boards or members face criminal charges or investigations. This can be crucial when a board member is accused of wrongdoing, such as theft or safety violations, while performing their duties.
• Property Protection
• This aspect of LEI provides coverage for legal action related to trespass, nuisance, or damage to condominium property by a third party. Condo boards may rely on this coverage to address physical damage or disputes over financial responsibility for repairs.
• Contract Disputes & Debt Recovery
• LEI often includes support for legal costs associated with contract disagreements with vendors, service providers, or suppliers. It may also cover debt recovery efforts when a vendor fails to fulfill contract obligations or mischarges for services.
• Bodily Injury
• LEI may cover legal costs when pursuing claims related to serious injuries or deaths that occur due to third-party negligence. For condo board members, this coverage can be essential when seeking compensation for injuries sustained during official duties.

As legal challenges become more frequent, condo corporations need comprehensive insurance to safeguard their operations. With complete CGL, D&O, and LEI policies in place, condo corporations can manage legal risks, protect financial health, and support board members and volunteers. LEI can fill critical gaps, ensuring condo boards have access to legal expertise for contract disputes, property protection, and other vital issues. By investing in these policies, condo corporations can focus on fostering a thriving, harmonious community without facing potentially severe litigation costs.

Brandon Murphy is a Client Executive for the BFL CANADA Realty Division with over 5 years of Real Estate insurance experience.

bmurphy@bflcanada.ca

About BFL CANADA

BFL CANADA Risk and Insurance Services Inc. is one of the largest employee-owned and operated commercial insurance brokerage and consulting services firms in Canada. Our Realty Division, with a team of over 200 real estate professionals located in 27 cities across the country, understands the risks faced by all types of properties from strata and condo corporations to apartments, commercial and bare land properties. To learn more about us and what we do, visit www.bflcanada.ca/realty-insurance-services

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