This ACT lot owner would like to know about changes to strata insurance excess impose by Unit Titles Management Act 2011. Christopher Kerin, Kerin Benson Lawyers provides the following information.
Question: Who is liable for insurance excesses in instances where the body corporate is at fault or liable for the damages? In this case, units flood during heavy rain because of a drainage design fault.
Owners at my unit complex in Canberra recently took the Owners Corporation to ACAT about the fact that the units flood during heavy rain because of a drainage design fault, and affected owners are being told they are liable for the insurance excess when they make a claim for flooding damages. The excess now $5,000.
ACAT recently sent their decision on the matter. They dismissed the application with no explanation or caveats. What does this ACAT outcome mean for the broader legislation on this matter regarding the liability of insurance excesses in instances where the body corporate is at fault or liable for the damages?
Answer: A beneficiary is liable to pay any excess which is payable in relation to a claim by the beneficiary.
The Owners Corporation is responsible for the repair and maintenance of common property and if the units plan has class A units, defined parts. This responsibility, unfortunately, extends to the rectification of building defects.
A lot owner can take legal action against the owners corporation in ACAT for a failure to rectify building defects. Without knowing more about the case, I can’t much more.
The issue of insurance is a different one. That is, the general principle is that a beneficiary is liable to pay any excess which is payable in relation to a claim by the beneficiary. If the beneficiary is the lot owner, then the lot owner must make the claim and pay the excess. The same principle applies to owners corporation. That is, the owners corporation cannot require lot owners to pay the excess on a claim made by the owners corporation without a rule requiring this.
For more on this, please refer to Blackman v The Owners – Unit Plan 666 detailed below.
This post appears in Strata News #289.
Question: At a recent general meeting I was told that ALL strata insurance excess is paid by the owners corporation. My strata manager mention there was a new rule which came in about 5 years ago.
At a recent general meeting I was told that ALL insurance excess is paid by the owners corporation. During the meeting, the strata manager mention there was a new rule which came in about 5 years ago.
Questioning the strata manager further I learn that there are only “some” circumstances where the owners corporation will pay the insurance excess. The strata manager refused to give more details and also refused to cite the rule but stated it exists in the Unit Titles Management Act 2011. I’m trying to confirm whether the strata manager just made this up.
Do you know if any part of the Act states that the Owners corporation of class B type units has to pay insurance excess on a lot owner’s common property?
Answer: The 2011 amendments to the UTMA resulted in the insertion of a section which provides that a regulation may make provision in relation to an insurance policy including for the payment by unit owners of any excess payable under the policy.
Please see the attached extract from my book which explains the relevant Case and section of the Act. Interested in purchasing this book? See details below for the link.
5.27 Case Note Blackman v The Owners – Unit Plan 666  CS 07/70827 – Small Claims Court in ACT Magistrates Court
The applicant suffered damage to his unit when a water heater in the unit above the applicant’s failed. The owners corporation was prepared to lodge a claim for the damage but sought to make the applicant liable for the excess to that claim.
The Court held that the insurance policy was one which indemnified the owners corporation for claims made by, inter alia, owners rather than a policy which indemnified owners in respect of damage to units. Consequently, if an owner claimed against the owners corporation for damages in connection with their unit, the owners corporation may either pass the claim onto its insurer or pay the owner without making a claim.
The Court held at paragraph 17 that ‘absent a bylaw passed by the Proprietors Units Plan 666 placing the responsibility for such payment in a particular place, the entity Proprietors Units Plan 666 must wear the excess. It is, after all, its insurance’.
In this situation, the Court ordered that the owners corporation fund the cost of repairing the damage to the applicant’s unit and meet costs not covered by the insurance from its own resources.
The Court briefly reviewed section 132 of the UTA (now section 100(4) of UTMA) and concluded that an implication exists that the building insurance contract is between the owners corporation and the insurer rather than individual members and the insurer.
Finally, the 2011 amendments to the UTMA resulted in the insertion of section 100(3)(a) which provides that a regulation may make provision in relation to an insurance policy including for the payment by unit owners of any excess payable under the policy. However, the UTMR do not currently address this.
Have a question about strata insurance excess in ACT or something to add to the article? Leave a comment below.
This post appears in Strata News #270.
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This article is not intended to be personal advice and you should not rely on it as a substitute for any form of advice.
After more detailed information dealing with Strata Law in the ACT? Chris Kerin’s Guide to ACT Strata Law is now available.