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Can a condominium corporation seek recovery of subrogated interests from a unit owner?

Martin Smith
Martin Smith,

Marla Kuperhause
Marla Kuperhause,

June 2020

by Martin Smith and Marla Kuperhause

Subrogation is the process whereby an insurer, after indemnifying its insured, assumes its insured's right to recover damages as against a tortfeaser who is liable for causing the damages. Since the insurer's right to subrogate is derivative, the insurer is subject to the same limitations that the insured would be when seeking recovery from third parties.

It is well-settled law that an insurer cannot subrogate against its own insured, as the same policy of insurance would respond to such a claim. It is further accepted that a defendant cannot seek contribution and indemnity from a party who cannot be liable to the plaintiff for the same loss.

When determining whether a condominium corporation can pursue a subrogated claim against a unit owner, consideration must first be given to the condominium's declaration and bylaws. Often, these documents contain a covenant to insure which requires the condominium corporation to take out all-risk insurance for common elements in the names of the corporation, its employees and the owners of individual units.

For more than forty years, the case law recognizes that covenants to insure represent an allocation of risk among the parties to a contract, such that the parties cannot claim against one another for losses suffered that would be covered by the covenanted insurance. In other words, if a covenant to insure exists, a condominium corporation will likely be precluded from recovering subrogated damages from individual unit owners as they are both insured under the same policy.

The condominium declaration and/or bylaws may also contain a waiver of subrogation, whereby the condominium corporation, its employees and individual unit owners agree that they will not seek recovery of subrogated damages from each other. Such waivers may also appear in service contracts between unit owners and service contractors, and would similarly prohibit an insurer's ability to successfully subrogate against these parties.

Similar to Ontario, the laws pertaining to covenants to insure and waivers of subrogation are consistent in the western provinces of British Columbia and Alberta. An owner of a unit within a condominium or a strata may be protected by the same waivers of subrogation and/or covenants to insure set out in the strata declaration or bylaws. These provisions serve to protect owners, and in some cases tenants who normally occupy the unit.

Covenants to insure and waivers of subrogation can be used as complete bars to a plaintiff's claim. They ought to be investigated prior to issuing a subrogated claim in order to avoid incurring unnecessary fees for an action that may ultimately fail.


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