This article discusses strata blockage flood insurance by explaining how damage from a strata-related blockage is split between strata insurance for building repairs and contents insurance for personal items.
Question: An outside blockage flooded my laundry. Strata has suggested I claim small items from my own contents insurance. Is this correct?
My laundry flooded because of an outside blockage. Strata initially told me to list all the items damaged in order to get reimbursed. Besides the floor, cabinets and cupboard damages, I’m also asking for smaller items such as bed sheets, clothes, cleaning products, etc to be replaced.
They have replied that the smaller items are not covered under the strata’s insurance and I will need to lodge a claim under my own contents insurance for these items.
If it’s their fault, why should I use my own insurance? What if I’m not insured? They caused the problem due to lack of maintenance, so shouldn’t they cover all the damages?
Answer; If the owner believes the owners corporation are at fault for the damage to their property, the recommended course of action for the owner is firstly to contact their contents insurer to lodge a claim.
The Strata Management Act requires the Owners corporation to insure “building” specified under the act. Lot owners contents items such as bed sheets, clothes, cleaning products are not covered by the property damage section – it is therefore recommended contents insurance is taken out to cover these items.
The only way a claim for damage to property not covered as “building” can be considered under strata insurance is a public liability claim made against the owners corporation. For a claim to be successful would need to demonstrate that the owners corporation were legally liable for the loss sustained. A common claim is under a public liability policy is negligence, being that the owners corporation had a duty of care and they breached that duty of care.
If the owner believes the owners corporation are at fault for the damage to their property, the recommended course of action for the owner is firstly to contact their contents insurer to lodge a claim. When lodging the claim, the owner should explain to their contents insurer why they believe the owners corporation are at fault.
The contents insurer should then lodge a claim and conduct the repairs on behalf of the owner and charge the owner an excess prior to repairs starting.
At the end of the claim the contents insurer will determine if the owners corporation are liable. If they believe there are grounds to suggest the owners corporation are liable, the contents insurer may then pursue recovery against the owners corporation who can refer the claim to the strata insurer under the liability section of the policy. If the contents insurer is successful in recovering costs in the absolute majority of cases contents insurers will refund the excess (the owner should check with their insurer that they will refund the excess upon recovery of the claims costs). If the contents insurer does not believe the owners corporation is liable or they are not successful in recovery against the owners corporation the excess will not be refunded.
Alternatively the owner can pursue a recovery against the owners corporation. To do so the owners will need to submit a letter of demand to the owners corporation. A letter of demand should contain:
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A description of incident and date;
Why you believe the owners corporation are liable;
A summary of your costs (such as quotes or invoices for repair);
Bank Details of where a settlement can be made.
While the standard of care imposed on an owners corporation is high, it is not unlimited. With regard to the question of who is liable for the damage this is a legal question that is specific to the circumstances of the claim and best answered by legal professionals. It should be noted that a leak from a pipe on owners corporation property does not necessarily mean they are automatically liable. Common defences strata insurers (on behalf of the owners corporation) have is in relation to the question of “negligence” can include “the owners corporation had no prior knowledge of the leaks identified prior to being notified by the lot owner and any leak would be from an unforeseen cause with no contribution from the owners corporation. There is no indication the owners corporation could have done anything differently in order to have better mitigated loss of the lot owner, therefore they were not negligent in their actions and therefore would not be found negligent under common law”.
This post appears in the April 2021 edition of The NSW Strata Magazine.
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.