What if a strata building cannot obtain insurance?

The Strata Titles Act 1985 provides clear guidelines on the actions a strata corporation must take if they cannot insure a strata building.

Section 97 Required insurance

Section 97 (2) states:

"…if a strata company has taken all reasonably practicable steps available to it to obtain the required insurance but no insurer is willing to enter into a contract of insurance on reasonable terms that meets the requirements, the strata company must obtain whatever insurance it can obtain on reasonable terms that most closely meets the requirements."

Section 97 (3) further states:

"The Tribunal may, on application by a strata company, exempt it from compliance with this section subject to conditions specified in the exemption."

It is essential to understand that the legislation does not permit a building to be without insurance. It mandates obtaining alternative insurance. If the alternative insurance is cost prohibitive, this does not grant the strata corporation the right to forgo obtaining the alternative.

For buildings unable to secure insurance, I recommend the following steps:

1. Seek assistance for quotes: Obtain quotes from the direct market and multiple brokers to demonstrate that all reasonable steps have been taken to find an alternative.
2. Apply for an exemption: If insurance cannot be found, apply for an exemption with the Tribunal.
3. Evaluate alternate insurance proposals: If you are considering an alternate insurance proposal rather than not taking out insurance due to prohibitive costs, apply for an exemption rather than deciding to forgo the available alternative.

Buildings that cannot find insurance may be exposed to legal claims for failing to meet statutory obligations. It is crucial to seek appropriate advice from your strata manager, insurance adviser, and, if necessary, legal counsel.

This information is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. Shandit Pty Ltd T/as Strata Insurance Solutions strongly suggests that no person should act specifically on the basis of the information in this document, but should obtain appropriate professional advice based on their own personal circumstances. Shandit Pty Ltd T/As Strata Insurance Solutions is a Corporate Authorised Representative (No. 404246) of Insurance Advisenent Australia AFSL No 240549, ABN 15 003 886 687.