Condo Corporation Insurance Risk - Immediate Review Required

Condo Corporation Insurance Risk - Immediate Review Required

Protect Your Condo Corporation’s Financial Health

At HomeHealth Solutions, we are committed to helping condo corporations safeguard their financial stability. A recent case has revealed a significant vulnerability in many condo insurance policies—one that could leave corporations exposed to financial loss. 

It is critical for condo board members to take immediate action to review and, if necessary, amend their policies.

Why This Matters: A Real-Life Incident

A condo management company recently misappropriated a substantial amount of funds from a condo corporation. When the corporation filed an insurance claim, it was denied. The reason? The insurance policy did not classify the condo management company or its staff as employees of the condo corporation.

This oversight left the condo corporation unprotected and forced them to bear the financial loss. If your condo insurance policy has similar wording, your corporation could face the same risk.

Implications:

  • Condo corporations may not be financially protected in cases of fraud or mismanagement.

  • Board members could face legal and fiduciary consequences.

  • Unit owners' trust in the board and financial stability of the corporation may be at risk.

Understanding the Risk in Your Policy Wording

Many condo insurance policies contain unclear or limiting definitions of 'employees' and 'covered entities.' If the management company and its staff are not explicitly included in your policy, your condo corporation may be vulnerable.

Common Policy Wording That Poses a Risk:

  • Excludes third-party management companies from coverage

  • Fails to define 'employees' broadly enough to include management staff

  • Lacks explicit coverage for financial mismanagement or fraud by external entities

What a Strong Policy Should Include:

  • Clear definition of covered employees that includes management companies and staff

  • Protection against fraud or financial misconduct

  • Explicit inclusion of third-party service providers who handle condo finances

Action Steps for Condo Board Members

1. Conduct an Immediate Policy Review

  • Locate your current Condo Corporation Insurance Policy.

  • Read the definitions of 'employee' and 'covered entities'.

  • Compare the wording in your policy to the examples provided in this article.

2. Consult Your Insurance Broker

  • If your policy excludes condo management companies and their staff, request a policy amendment.

  • Ask for updated wording that explicitly includes third-party management companies and financial service providers.

  • Ensure your policy covers misappropriation of funds and fraud-related incidents.

3. Legal and Risk Management Consultation

  • Engage a legal or risk management expert to ensure full coverage.

  • Review how your insurance policy aligns with Alberta’s Condominium Property Act and regulations.

4. Educate Unit Owners and Board Members

  • Keep all stakeholders informed about potential risks and policy updates.

  • Discuss insurance protection during annual general meetings (AGMs).

Why Taking Action Now is Critical

Ignoring this risk could lead to: ✅ Financial instability for the condo corporation ✅ Increased condo fees for unit owners due to uncovered losses ✅ Legal repercussions for board members who fail to mitigate risks

By addressing these insurance gaps now, you protect your condo’s financial future and strengthen governance.

Resources for Condo Boards

📂 Non-Highlighted Policy Example: Shows the problematic wording that puts corporations at risk. 📂 Highlighted Policy Example: Demonstrates the recommended wording for full coverage.

Need Assistance? Contact HomeHealth Solutions today for expert guidance.

🚀 Take action now—review your condo insurance policy and ensure your corporation is fully protected.