Liability Risks for Condominium Corporations and BoardsEmployer and Owner Status Increases Exposure

By Joseph Griffiths and Christy Allen

Security/Safety/Risk Management

PROPERTY MANAGEMENT REPORT SEPTEMBER 2009 9

As legal entities, condominiums are exposed to some significant liability risks. Condominium boards of directors should be aware of the following issues.

OCCUPIER’S LIABILITYUnder section 26 of the Condominium Act, 1998, a condominium corporation is deemed to be an occupier of the common elements. The legal obligations of an occupier are set in Ontario’s Occupier’s Liability Act:

An occupier of premises owes a duty to take such care as in all the circumstances of the case is reasonable to see that persons entering on the premises, and the property brought on the premises by those persons are reasonably safe while on the premises.

The duty imposed on the condominium applies whether the danger is caused by the condition of the property or by an activity carried out on the property. To fulfill its duty, the condominium is required to take reasonable steps to ensure that the common elements are reasonably safe for all users, including employees, residents, their guests and invitees.

It should be noted that in some cases, the condominium’s duty as the occupier is shared with the owners. For example, owners will have an obligation to ensure that those portions of the common elements, identified as exclusive use, are safe for use by all users. The Declaration, By-laws or Rules may also transfer or delegate some responsibility for the common

elements (or a certain aspect of the common elements) to owners.

The condominium’s duties are not limited to that described by the Occupiers Act. The condominium also has a duty to take reasonable steps to enforce its Declaration, By-laws and Rules. Even where those governing documents transfer responsibility to ensure that the common elements are safe for use to owners, the condominium must still take reasonable steps to ensure that the owners fulfill that obligation.

In order to reduce the condominium’s exposure as the occupier of the common elements, many boards are arranging a regular review of the conditions of the common elements. That review may identify any dangerous conditions that exist with the common elements and assist the condominium in addressing or resolving those conditions, perhaps relating to adequate snow clearing/salting in the winter, icicles, fallen trees or debris, etc.

B e y o n d t h e s e r e q u i r e m e n t s , a condominium must also ensure that any owner complaints or comments regarding the condition of the common elements are investigated in a timely manner. The regular review, as well as the results of investigation of a l l ow ner complaints , should be documented in a log. This will provide the condominium with evidence that it did fulfill its legal obligations.

FIRE SAFETYIn addition to being deemed occupiers of the common elements for the purposes of occupier’s liability, condominiums are also considered to be owners of units for the purposes of the fire code. Condominiums must therefore take reasonable steps to ensure that all units comply with the fire code.

The Courts have not confirmed what constitutes reasonable steps for the purposes of the fire code, but generally speaking, a condominium is going to be most concerned with the functionality of smoke detectors and/or fire alarm systems within each unit, along with the common elements where appropriate. To fulfill that obligation, a condominium may elect to undertake an annual inspection of each unit to confirm that the fire alarm system is functional and that the unit and, where appropriate, the common elements, have the requisite number of smoke detectors.

The Court has confirmed in at least one case that this approach is reasonable and would satisfy the condominium’s obligations under the fire code. However, this may not be feasible in larger condominiums.

As an alternative, the condominium might consider requiring its owners to confirm in writing, on an annual basis, that their fire alarm systems are functional and that their units have the requisite number of smoke detectors. If an owner failed to provide written confirmation, the condominium would then undertake an

inspection of the unit. Although this approach is less onerous on the condominium, it has not been judicially considered and may not meet the condominium’s legal obligations.

WORKPLACE SAFETYWhen a condominium hires or contracts with a person or company to undertake work for the corporation, the condominium is subject to the applicable workplace safety legislation. In Ontario, the Occupational Health and Safety Act (OHSA) governs all workplaces.

As such, the condominium will have obligations under the OHSA, either as the employer where an employee/employer relationship exists, or as the owner where it has hired an independent contractor. It should be noted that a determination of whether an employee/employer relationship or owner/independent contractor relationship exists will depend upon the nature of particular arrangement.

Simply because a contractor is called an independent contractor in a contract for service does not necessarily make it so. Condominiums should consult with their legal counsel to ensure that the arrangement complies with the legal requirements of an owner/independent contractor relationship.

The advantage of that relationship is that, generally speaking, under an owner/independent contractor relationship, a condominium may shift at least some of the liability under the OHSA to an independent contractor. In contrast, under the OHSA, the obligations of an employer are far more onerous than the obligations of an owner.

Generally speaking, an owner must take all reasonable steps to ensure a safe and healthy workplace. The obligations of an employer are numerous, and include ensuring that workers are properly instructed and supervised with respect to health and safety at the workplace, ensuring that proper protective equipment, materials and devices are available and are properly used by the employees, and generally ensuring that every reasonable precaution is taken in the circumstances to protect all workers.

Condominiums may have further obligations under the OHSA as a supervisor and/or a constructor of the work.

Condominiums should not be surprised if, as part of any destructive work, its engineer or consultant includes in the scope of work a Designated Substance Survey (DSS). New regulations make a DSS a prerequisite before almost any destructive work may be carried out.

The survey must be undertaken by a qualified individual, who will review the premises for any designated substances, including asbestos, mould, lead, mercury, silica and other contaminants. Before the work begins, the condominium must ensure that workers are not exposed to any dangerous substances during the work. If designated substances are discovered, the DSS consultant must establish a designated substance management plan.

OBLIGATIONS & SAFEGUARDSFailure to meet the requirements of the OHSA can lead to fines and penalties against condominiums, as well as against its directors and/or agents (which can include managers) of the condominium individually. Recently, the Criminal Code was amended to include the following language:

“Every one who undertakes, or has the authority, to direct how another person does work or performs a task is under a legal duty to take reasonable steps to prevent bodily harm to that person, or any other person arising from that work or task.”

This amendment was implemented following the Westray Mines disaster, and essentially makes it a criminal offence for an owner or employer (or supervisor or constructor) to fail to take reasonable steps to prevent bodily harm with respect to the work undertaken. While this addition to the Criminal Code does not alter the duties of a condominium,

or its directors or agents relating to work undertaken at the condominium, it does make the penalty for not doing so far more serious. It is therefore important that condominium directors and managers are mindful of their obligations when undertaking work at the condominium.

Given the risks in this area, condominiums should be sure that they are well informed of their obligations before undertaking any major work on the common elements. Under subsection 37(3) of the Act, the directors and officers of a condominium can reduce their liability by following the advice of the condominium’s consultants (e.g. an engineer or an architect) and its legal counsel. As such, it is important that appropriate advice be sought in advance of any work being done at the condominium.

In addition, in an effort to reduce its risks and liability, a condominium can arrange for the development of an occupational health and safety policy. While safety policies are generally required by the OHSA, a condominium may wish to invest in a more comprehensive policy to be followed, which would be further evidence that the condominium met its legal obligations under both the OHSA and the Occupier’s Liability Act, if and when a claim were to arise. A condominium may wish to consult its engineer (some consultants specialize in the development of health and safety policies) and/or legal counsel to assist it with the development of this type of policy.

INSURANCEFinally, sections 99 and 102 of the Act require a condominium to maintain property and liability insurance. This insurance will, generally speaking, provide the condominium with coverage for many of the above stated risks.

Insurance is not a substitute for preventative action and does not eliminate the condominium’s legal obligations. In fact, insurance coverage is often affected by a condominium’s failure to meet its legal obligations under any of these legislative schemes.

In addition, section 39 of the Act requires condominiums to obtain and maintain directors and officers’ liability insurance where it is reasonably available. Generally speaking, D&O insurance is reasonably available across Ontario, and all condominiums should have a D&O policy in place.

This insurance will provide coverage for directors and officers with respect to their individual obligations in relation to the above noted risks, and will also provide some comfort to those individuals who volunteer their time and energy to participate as a director or officer of the condominium. Managers should also ensure that they have appropriate insurance in place to address their own liability exposure for the above noted risks. pmr

Joseph Griffiths is a member of the Insurance Defence, Personal Injury and Wrongful Death practice groups with Nelligan O’Brien Payne LLP. Christy Allen is an associate with the Condominium Law practice group with Nelligan O’Brien Payne LLP. For more information, see the web site at www.nelligan.ca.

10 SEPTEMBER 2009 PROPERTY MANAGEMENT REPORT

Security/Safety/Risk Management