This article discusses strata insurance claims in NSW when committee refuses to act and what owners can do if a strata chair blocks an insurance claim after storm damage.
Question: What can an owner do if a chairperson refuses to support an insurance re-evaluation and reimburse emergency storm repairs?
I am in northern NSW. Tropical Cyclone Alfred made landfall on 8 March and was legally downgraded to a storm for insurance purposes. On 10 March, my lot required emergency electrical repairs, and my fence was blown over. Other fences were also damaged, and there was additional damage across the scheme. My electrical repairs and fence replacement total almost $3,000.
The owners corporation’s strata policy has a $160,000 excess for cyclone damage and a $5,000 excess for storm damage. The owners’ corporation submitted claims totalling about $30,000, but the insurer refused the claim on the basis that the damage was cyclone-related, and the $160,000 excess exceeded the claim.
The Office of Fair Trading suggested I lodge a complaint with the Australian Financial Complaints Authority (AFCA). AFCA required the insurer to reopen the claim for re-evaluation, but the insurer said it needs authority from the owners corporation. The chairperson, who is also the secretary, has refused to give that authority.
The chairperson has also refused to reimburse my emergency electrical repairs and fence replacement costs. What options does an owner have to have their repair costs fairly recognised and reimbursed, and how can the owners corporation resubmit the insurance claim for the benefit of all owners if the chairperson refuses to assist?
Answer: Individual committee members, including the chairperson, do not have the authority to prevent a legitimate insurance claim from being lodged.
There are four distinct issues arising from the circumstances you have outlined, which I will address separately below.
- Owners corporation refusal to facilitate an insurance claim: In New South Wales, the owners corporation is required to take out and maintain strata insurance for the building and common property. Individual committee members, including the chairperson, do not have the authority to prevent a legitimate insurance claim from being lodged or considered if the damage falls within the scope of the policy. If the owners corporation, via its committee, is refusing to provide authority for an AFCA dispute, your appropriate course of action is dispute resolution with the owners corporation. This can be found on the NSW Fair Trading website: Strata disputes
- Cyclone vs storm classification and applicable excess: The question of whether the damage event attracts the cyclone excess ($160,000) or the storm excess ($5,000) is ultimately an insurance cover dispute. Where there is disagreement, the appropriate forum to determine this issue is the Australian Financial Complaints Authority (AFCA). AFCA has the authority to assess whether the insurer has correctly applied the policy terms to the event, including the relevant excess.
- Related practical issue – application of excess factoring in other claims: Your individual repairs total approximately $3,000. The balance of the original claim relates to damage claimed by the owners corporation and/or other lot owners. It is therefore important to clarify whether those parties still wish to pursue their respective portions of the claim. If the owners corporation and other affected owners do not wish to proceed with their portions, the remaining claim would be limited to your $3,000.
In that circumstance, the claim would fall below the applicable storm excess of $5,000. As a result, even if the damage were accepted as storm-related, AFCA would be unlikely to direct the insurer to make any payment, as the claimed amount does not exceed the policy excess. In practical terms, this means that your ability to recover costs under the insurance policy may be materially affected by whether the broader owners corporation claim is pursued.
- Responsibility for repair costs in the absence of an insurance payment: If, following the appropriate dispute resolution processes (including AFCA), the claim is ultimately unsuccessful, responsibility for the repair costs will depend on whether the damaged items are common property or part of your lot. Based on the information provided, the emergency electrical repairs and fence replacement appear to relate to your individual lot, with total costs of approximately $3,000. In the absence of an insurance claim outcome in your favour, the cost of maintaining and repairing the lot property remains the responsibility of the owner of the property.
I trust this clarifies the respective issues, responsibilities, and available pathways.
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 #782.
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