This article discusses strata insurance excess responsibility by explaining who may have to pay the insurance excess when a leak from one lot damages another unit.
Question: Our hot water system damaged the downstairs neighbour’s ceiling. We can claim on strata insurance, but who pays the excess?
Our tenant didn’t realise the hot water system was leaking until the downstairs neighbour told them her ceiling was wet. We have had the hot water system replaced. No damage was done to our unit. Our Strata Manager now says that we can make a claim for damage to the neighbouring unit under the Strata Insurance but we are liable for the excess of $1000. Is this correct?
Answer: NSW Strata legislation is silent on who is responsible for payment of excess.
NSW Strata legislation is silent on who is responsible for payment of excess.
As legislation is silent on this issue, we firstly recommend reviewing the by-laws of the strata corporation to see if there is guidance on excess in the strata corporation by-laws.
The first question is determining whether or not the owner of the hot water system is liable for the damage. Liability claims are considered on a case by case scenario by solicitors & judges (if the claim ends up in court). It could be argued that the owner failed to maintain and keep maintaining their lot in good repair and thus they are negligent for the damage. On the flipside, it can be argued that the incident itself was not foreseeable and thus the owner used reasonable care to maintain and keep in good repair their lot.
The payment of an insurance excess attracts the benefit principle. It is money paid out to effect a repair, and as such consideration should be given to the person or persons who benefit. In this case, if it is found the lot owner is liable for the damage, you may suggest the lot owner of the lot that has the hot water system, is receiving the benefit. Not because their property was damaged and requires repair, but because the source or cause of the damage arose from their lot. In effect, the lot owner is receiving the benefit of not having to pay the full cost of the damage.
This post appears in the July 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.
Leave a Reply