Insurance And Liability Coverage: How To Make Sure Your Condo Doesn’t Pay For Your Condo Vendor’s Mistakes

Accidents happen. Who didn’t, at least once, slip and fall on its behind while walking down the street? Or tripped on something because they were not paying attention? Most of the time it’s a small thing and we can laugh it out or walk it out as gracefully as possible. But what happens if it’s not something small and it happened to someone in the condo premises? And what if its not even the condo's fault, what if its the result of work of a condo vendor?

Condo corporations are responsible for maintaining the building premises in good condition and ensuring that they are safe-for condo owners, residents, visitors and pedestrians alike. To do this, condo corporations generally use independent condo vendors to perform improvements, inspections and maintenance to the common areas of the property.

Nonetheless, an important thing to remember - and the key of this blog - is that even though the actual work is performed by a condo vendor, in case the work is not done properly and it results in an injury or damage to someone or something, the condominium will be liable for said damages and will be held responsible in accordance to applicable laws and regulations.

This might seem unfair for some people. Why should the condominium be responsible if the work and the mistake was done by the independent condo vendor? Yet that’s how it is. Having said that, there are things to do to limit the condominium’s liability and we are here to help you discover them.

📑⚖️Liability and indemnity clause 

In Stratastic we believe in the power of diversity. Diversity of opinions, of socio economic backgrounds and of professional experiences. Our team has experience in many aspects besides condo management, like graphic design, psychology, corporate law and litigation. This particular article is being written by one of our colleagues who used to deal with these types of situations all the time as a corporate lawyer (Hello 👋🥳), and has some tips used by all the big companies to limit their liability or transfer the damage compensation costs to the other party.

What is the big secret 🕵️‍♂️? Just one sentence. 

For example: “The Contractor shall be liable for all damages caused to third parties as a result of the works performed by the aforementioned in the context of the present contractual relationship.”

A clause as simple as that, just 30 words, can save a condo thousands of dollars in damage compensations. This is not to say that every condo should copy-paste that exact sentence in all condominium’s their contracts with condo vendors. But they should make sure that they include a liability and indemnity clause in all their contracts.

Indemnities and limitations of liability are key contractual risk allocation provisions found in most [...] contracts - OGCA

Liability and indemnity clauses are a very complex and intricate topic that should not be taken lightly. Lawyers spend hours and days debating about them, what words to use; where to put the comma or the dot; how to define the limit of each parties responsibilities; how will the indemnity will be put to practice; and man others aspects. It’s usually a very delicate dance between both parties' lawyers to reach common ground.

In order to get the best possible result for your condo management and the board, you should make sure to tackle this topic together with their legal counsel. Although it’s possible to find general liability and indemnity clauses with a quick search online, they might not -and most likely will not- cover all possible outcomes in your condo’s specific contractual relationship, or will provide as much protection to your condominium as it should.

Some things to consider when redacting these clauses 🖌️📖

• 🏠 Type of damages covered (property, personal, etc.)

• 💰 Maximum liability amount for the contractor.

• 🤔 Consequences for damages due to contractor negligence.

• 💵 Minimum contested responsibility amount for the contractor.

• 🤝 Party responsible for negotiations or litigation with the affected third party.

• ⚖️ Consequences if the contractor fails indemnity obligations.

• ⏳ Payment period for the liable party.

Insurance 🏛️

Depending on the financial condition of the condo vendor or of your condo’s relationship with them, they might not agree to sign an indemnity and liability clause; or even if they do, it might not be one that ensures that the condo corporation will be covered to the full extent it might need. In this case, an alternative or complementary insurance clause will be preferred.

Whereas indemnity and liability clauses will not entail any additional cost until and only if an accident occurs, hiring an insurance will have a small but consistent cost, regardless of whether an accident happens or not. At the same time, if there is no insurance provided by an insurance company, if a serious accident takes place, there is a possibility that the condo or the independent contractor will not be able to face the cost without incurring in some severe financial losses.

Like we said in the beginning of this article, accidents happen, but they don’t happen to everyone all the time. There is no crystal ball to consult and no way of knowing beforehand what is the best way to proceed. What we do know is that no one wants to be faced with a significant damages claim where no one knows who is responsible for it and how to proceed.

Regardless of whether you choose to proceed with a lengthy and complex indemnity and liability clause, a third party insurance, or both, the best thing you can do is contact an expert. Contact your legal counsel and/or your insurance broker and work together with them to understand what is your best alternative. Also remember to ensure that your contractors have WSIB coverage for the cases in which the accident or the damages does not happen to a third party, but to one of your contractor’s employees. 

Finally, don’t despair in case your contractor refuses to add any of these clauses. It is normal to face resistance when proposing this type of clauses, but with good advisors and clear communication it is possible to achieve a middle ground that satisfies both parties.

-Stratastic

P.S. You can start your search for a condo lawyer on Stratastic Vendor Directory and can also look at the Law Society of Ontario.

Also, don't forget to register for more informative articles such as these!