Getting the wrong insurance can be a $25,000 mistake when your condo floods

Jeremy Yuen, a 27-year-old professional who owns a condo in downtown Toronto, wanted to come home after a long work day and relax on his sofa.

First, he changed his clothes and headed to a health club for a quick workout. Everything seemed normal when he left, however when he returned under an hour or so later, he noticed water around the kitchen floor.

It wasn't only a spill. He quickly discovered water was pouring down from the ceiling lighting fixture. Suddenly, Yuen was scrambling to determine what was happening and how he could stop it.

“I spoke with building management plus they had to figure out which unit the water was coming from,” he states.

Yuen soon learned that the source was from the unit directly above him. “The woman left her condo but forgot to show her water off, therefore it kept running and her entire place flooded. Water trickled right down to my unit and the unit below me.”

Fortunately, the flooding was caught suddenly that the water didn't leak into any other units, however it was too late for Yuen. His unit suffered the majority of the harm.

“A lot of my ceiling needed to be replaced, plus my drywall and hardwood flooring,” he says. “There seemed to be a laptop which was damaged.”

The woman left her condo but forgot to show her water off, therefore it kept running and her entire place flooded

Yuen's problems extended beyond on that day, however. Within the following weeks, he started a claims process that involved multiple companies, potential law suit, and a lesson in insurance plans for his upstairs neighbour.

“She didn't have insurance, which meant a lot of complications personally,” says Yuen. “Toronto building bylaws prohibit insurance providers from going after the individual (if they don't have insurance).”

The building's insurance covered the harm towards the ceiling and drywall. Then, your building itself tried to recoup the expense personally in the woman who caused the harm.

But the building's insurance doesn't cover contents, including Yuen's new hardwood floors and the laptop, therefore if he wanted those things replaced, he'd have to claim them through his own insurance.

Because the upstairs neighbour did not have insurance, he states, dealing with his insurance meant his premiums would increase and he'd have to pay a deductible.

“It would have made sense on her to have insurance because she wouldn't have to pay for everything out of her very own pocket,” says Yuen. “She'd only have to pay an insurance deductible. Now, she's taking the hit for around $25,000, for the ceiling, walls and everything the building's insurance coverage is going [after her] for. Then, on top of that, [my damages] were about $4,000.”

Understanding your coverage

Major leaks in Toronto condos and elsewhere have become more common. Although some events can be attributed to human error, for example with Yuen's upstairs neighbour, others can occur because of faulty plumbing.

Kitec plumbing, for instance, is really a known issue in condos built between 1995 and 2007 – the pipes are prone to corrode quickly and burst. There have been class action lawsuit from the company and many condo owners have spent thousands of dollars simply to pre-emptively replace the piping, which was originally installed to save costs but, as it turns out, includes a much shorter lifespan than expected.

Whether the damage comes from a burst pipe or human error, the bottom line is to achieve the right insurance and understand what exactly is included in most possible events.

“At the end of the day, it's always important to speak to your insurance representative to obtain an awareness of the items your coverages are, what events you're protected for and just what your deductibles are,” says Pete Karageorgos, a director of consumer and industry relations using the Insurance Bureau of Canada.

“It provides peace of mind if you have that conversation.”

Water harm to any home – condo or otherwise – could be covered by a variety of insurances, but there is typically no blanket option that handles everything.

For example, flooding due to events for example burst pipes, backed-up toilets, or a leaking laundry machine is usually covered under most standard house insurance policies, Karageorgos says.

However, severe weather events are creating different options for water to find its distance to homes, and that is where coverage can get a bit more tricky.

Let's say a tree falls in your house and water is available in over the top. Generally speaking, insurance would cover this, according to Karageorgos. But if heavy rain overwhelms the sewer systems and there is a sewage backup, he adds, that isn't typically a standard coverage. It might have to be added on to your overall policy.

“What we are also seeing with severe weather events,” says Karageorgos, “is more overland flooding brought on by ponding or perhaps a lot of water with nowhere to visit that pools beyond a home or street and then rushes inside. Karageorgos calls to mind major 2021 floods in both Calgary and Toronto because of rivers overflowing and a $1-billion rainstorm, respectively. Torontonians will even recall the 2010 August flood that led to more than $80 million in insured damage.

“Not all insurances companies are covering (those events),” he states. “It requires, as homeowners and consumers, some shopping and homework on our part.”

Severe weather events are creating more ways for water to find its way into homes, and that's where coverage could possibly get a little more tricky

To help with this, some information mill starting to offer a comprehensive water package that would include overland flooding, sewer backup, burst pipes and more, according to Karageorgos. Homeowners just need to check around.

Meanwhile, condo owners, like property owners, also need to consider both their unit and the contents of their dwelling. As Yuen found out, certain items will be taught in building's insurance yet others by home insurance.

For tenants renting a condo, owners is going to be responsible for the unit itself but tenants still need to get content insurance for his or her belongings. Another aspect to bear in mind for both the owner and renter is liability in case you're found accountable for damaging another person's property.

“If the unit in which the water leak occurred is a result of the negligence of the unit owner simply because they left the bath running, took an appointment and then flooded their unit in addition to a few below them, they might be held responsible for that additional damage,” says Karageorgos.

“The liability part of your home insurance plan would shell out if you're available at fault within an event like this.”

Most companies that sell property insurance will package the insurance, whether for property owners or tenants, he adds. Some insurance providers will even label them as condo insurance policies, which could include items like property, liability, content and upgrades all in one.

If the girl above Yuen had proper insurance when she forgot to show off her tap prior to leaving her home, a lot of hassle could have been eliminated. Instead, it had been a weeks-long process for everyone involved and she or he had to foot the balance or face law suit.

After his experience, Yuen said insurance should be mandatory in building bylaws and it is something he's raised with his condo board. He recommends everyone check their bylaws to determine what's covered.

“Some people, from things i understand, may even possess the wrong insurance,” he added. “In this case, my neighbour thought she had insurance but she actually had mortgage insurance instead of property insurance.”

A seemingly small but costly mistake.