This article about insurance costs and cover for cladding has been supplied by Paul Morton, Lannock Strata Finance.
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The presence of composite aluminium cladding is having a financial impact on strata owners as they renegotiate insurance policies.
Speaking at the Lannock Strata Fire Safety Forum, Strata Community Insurance Managing Director Paul Keating said some insurers were beginning to change their approach to providing cover for cladding.
“Most strata insurance policies are accidental damage based so without specific changes being made to the wording by the insurer, there should be no immediate impact to existing cover,” said Mr Keating.
“However when owners negotiate new contracts, the presence of cladding must be disclosed, and some insurers are declining to renew, or applying limitations, large deductibles, or applying blanket exclusions to cladding.”
Mr Keating said strata owners should not presume the onus was on an official body such as a State Cladding Taskforce or Council, to notify owners of a potential cladding issue.
If you don’t receive a letter you are still not in the clear
“If you don’t receive a letter you are still not in the clear,” said Mr Keating. “There is enough publicity around this topic that a reasonable person needs to make inquiries. Strata Committees ought to check their records, arrange for a suitably qualified expert to inspect their cladding, and consult with their strata manager or insurance broker.
“The presence of cladding will impact on future insurance contracts where the cladding product has not passed AS1530.1 or related ‘deemed to comply’ provisions. There is a risk for committees of doing nothing, in the event of a significant fire, or even a small fire, that people will be looking for someone to blame; that is to say there could be damages sought or worse criminal charges where death is involved.”
Mr Keating said the focus had to be on establishing whether or not there was a risk to public health and safety and addressing that as a priority.
As to who should pay for the cost of rectification Mr Keating said there was a long chain of responsibility.
“We have great building standards but compliance falls way short,” he said. “There is responsibility all the way down the line and it is difficult to pick out one party.
“We do however feel that the consumer should not pay.”
Lannock Strata Finance Managing Director Paul Morton said strata committees could not afford to do nothing and hope the problem went away.
“Even people who don’t believe their buildings pose a risk may be impacted by rising insurance costs due to the presence of cladding,” said Mr Morton. “We have heard of owners whose premiums have almost tripled.
“Unfortunately, there remains a lot of uncertainty around this issue and it doesn’t appear to be getting any clearer with time.
“The best advice strata owners can follow is to check, inspect and consult. Find properly qualified experts who can provide good advice so that you can take the most appropriate action.”
This post appears in Strata News #173.
This article first appeared on the Lannock Strata Fianance Website.