This article is about whether a lot owner can receive unjust enrichment in body corporate insurance claims.
Question: Double dipping – Can owners receive unjust enrichment in body corporate insurance claims?
A leaking common property pipe caused water damage to an individual lot under a standard format plan in Queensland. The lot owner filed a claim with their contents insurance and received compensation for the damages. The body corporate reimbursed the owner for the insurance excess.
In addition, the owner demands full compensation from the body corporate, asserting that the body corporate’s legal responsibility is independent of the owner’s insurance. Given that the claimed amount is less than the body corporate’s insurance excess, the owner argues the body corporate should pay them directly.
Can the owner receive a double recovery, or does any subrogation, mitigation, or unjust enrichment apply here?
Answer: Double recovery is prohibited in law.
A body corporate is generally responsible for maintaining and repairing common property, including pipes. If the damage to the lot was caused by the body corporate’s negligence or failure to maintain the pipe, the body corporate could be held liable to compensate the lot owner.
When the lot owner claimed on their contents insurance and received compensation for the damage, the contents insurer acquired subrogation rights (the right to recover from the body corporate). Subrogation prevents the insured (lot owner) from recovering the same loss from a third party (e.g., the body corporate) while allowing the contents insurer to.
Double recovery is prohibited in law. If the lot owner has already received compensation from their contents insurer, they cannot claim the same amount again from the body corporate. Allowing the lot owner to recover twice would result in unjust enrichment, which courts have consistently rejected.
There are limited circumstances where a lot owner may retain the right to claim additional compensation from the body corporate:
- Excess Amounts: The lot owner may claim for the insurance excess they paid, as this amount was not covered by their contents insurer.
- Uninsured Losses: The lot owner can pursue claims for any damages not covered by their contents insurance policy (e.g., specific exclusions).
In such cases, the body corporate’s liability would still depend on proving negligence or failure to maintain common property.
If the body corporate’s insurer declined the claim because the damage was below the policy excess, the body corporate may still bear responsibility for reimbursing the lot owner for uninsured portions, such as the excess amount. However, any such liability should be offset by the amount already received from the contents insurer.
In this instance, it may be as simple as denying the request as the owner already received compensation for the damage through their contents insurer. Any further claim for the same loss would constitute double recovery, which is prohibited under Australian law, and result in unjust enrichment, to which the owner is not entitled.
Tyrone Shandiman
Strata Insurance Solutions
E: tshandiman@iaa.net.au
P: 1300 554 165
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.
This post appears in Strata News #725.
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