Additional insurance premium

The additional premium is a premium that is added to the existing premium. It results from a worsening of the risk or from the assumption of a new risk. This additional premium may be imposed during the course of a contract or upon its renewal. Risks are analyzed according to scales that are specific to each insurer. Ultimately, the syndicate will pay this additional premium, which will be charged to all of the co-owners through the common expenses (condo fees) or, at times, some of them.  It is important for directors to understand how these premiums are calculated and their impact on overall costs.

The increase in risk

When the risk increases while the contract is in force, the insured must declare it promptly to the insurer. The latter may therefore re-evaluate the amount of the premium, depending on his assessment of the risk. In the worst scenario, the insurer may cancel the contract or propose, in writing, a new higher premium. If the insured fail to respond to this proposal within 30 days, or expressly refuses the increase, the policy ceases to be in effect.

Moreover, the causes of an increase in risk can be diverse. At the top of the list are:

• The recurrence of claims;
• The lack of maintenance of the building;
• Certain activities carried out by co-owners in their private area (e.g. hotel-type rental) in a residential co-ownership.

Adding a risk

An additional premium should not necessarily be interpreted as a sanction as it sometimes allow for the addition of certain risks originally excluded from coverage. This supplement will be used (throught the addition of a guarantee) to increase the coverage. For example, it is possible to opt for an endorsement that covers earthquakes.

Apportionment of the additional premium between the co-owners

In the same manner as the insurance premium for the co-ownership, the additional premium must be allocated among the co-owners as a common expense based on relative value of their respective fractions. This is the only possible allocation method, because the statutory provision that prescribes it is mandatory, regardless of what the declaration of co-ownership provides on this issue.

Imputation of the premium to one or more co-owners

The co-owner responsible for an increase in risk should compensate the syndicate for the cost of the additional premium. Such a scenario occurs when the syndicate can demonstrate that the surcharge is the result of wrongful activities specific to one or some of the co-owners. Moreover, in many case, the declaration of co-ownership provides for a clause that attributes the surcharge in accordance with the fact that an activity is generated by a co-owner. Once the latter has paid, the syndicate shall credit each co-owner with the amount recovered, based on the relative value of their fraction.

Charge the surcharge to co-owners-lessors

As long as a co-owner's activity does not contravene the declaration of co-ownership and the destination of the immovable, the expense constituted by the insurance surcharge falls under the charges related to the maintenance, upkeep, and administration of the common portions. This expense must, therefore, be borne by all co-owners, despite the existence of a clause that stipulates the co-owner is responsible for reimbursing any insurance surcharge attributable to their personal actions. The Court of Québec clarified in 2019, in the case of a co-ownership where all co-owners have the right to rent out their apartments, that those who do so are not at fault. They should not have to pay for this right recognized by the provisions of the Civil Code of Quebec, which allows the owner of a property to use, enjoy, dispose of it freely and completely, and reap the fruits and revenues. As for those who do not rent out their apartments, they still benefit from this right, and it would be contrary to the law to penalize those who choose to exercise it. However, it would be different for a co-owner who rents out their apartment for a short period (e.g., an Airbnb-type rental ) when this type of rental is prohibited by the declaration of co-ownership.

WHAT YOU SHOULD KNOW! The calculation of the additional premium amount is specific to each insurer. It is based on the level of risk that the insured presents.

 WHAT TO KEEP IN MIND: An insurer may agree to insure a syndicate of co-owners who present a greater risk, or even a new risk, by applying a higher rate. We are therefore in the realm of an additional insurance premium.

 WARNING! Although the syndicate is justified to claim the additional premium arising from a fault committed by a co-owner, it is not a "common expense". In a decision rendered by the Court of Québec, the court ruled that in the event of the co-owner's fails to indemnify the syndicate, the syndicate could not proceed with the publication of a legal hypothec to guarantee the payment of the additional premium.

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