Question:A faulty tap damaged kitchen cupboards. The owner has made a claim against the strata insurance. What is the role of the Strata Manager (SM) in deciding whether or not to hand a claim to an insurer?
The common water supply runs past each lot’s yard. The individual supply comes off this line and enters each unit. One rental unit had faulty taps over kitchen sink, causing mould and deterioration in cupboards. The owner demanded a claim be lodged on strata insurance. The insurer paid the claim. They also activated the “water damage excess” clause, which meant that the OC had to cover virtually all of the costs of the new plumbing and cupboards.
What is the role of the Strata Manager (SM) in deciding whether or not to hand a claim to an insurer? Is the handover automatic or does the SM assess the details and determine the merit and any limits of common property?
Where the cause of water damage is attributed (by the insurer) to tap fittings over/under sinks inside a lot, is the insurer (and thus the OC) obliged to pay out the claim?
If the Strata Manager and Committee perceive that an owner has neglected to repair the internal plumbing and cupboards, is it reasonable to:
- Direct the owner to claim on their own (contents or landlord) insurances, or
- Require the affected owner to pay the strata insurance excess for the OC?
Answer: The committee, and the strata manager in particular, have very limited powers to stop an owner from lodging a claim.
We advise our clients that, generally speaking, when a lot owner has paid for insurance and insurance premiums, they have an insurable interest in the policy. Often committees may feel that an owner should not have access to the policy, but in instances where there’s a dispute over whether the owner should or shouldn’t lodge a claim, insurers will often take precedence to insurable interest and lodge the claim from the owner.
The committee, and the strata manager in particular, have very limited powers to stop an owner from lodging a claim if push comes to shove. They can always say to an owner, ‘No, we won’t allow you to claim’, and if the owner doesn’t dispute that, then it solves the issue. But if the owner really pushes the matter, it’s likely the insurer will accept the claim, because the owner has an insurable interest in the policy. The strata manager is probably off the hook here, because they’re just passing on the claim and facilitating that for the owner and the owner is entitled to claim.
Most water damage claims are preventable and are a result of lack of maintenance, as you mentioned in this claim. Can the owner claim on their contents or landlords insurance? Landlords and contents insurance does not cover any building fixtures and fittings and permanent fixtures. That includes any kitchen or bathroom fixtures, kitchen sinks, cupboards and so on, so these items can only ever be claimed under the strata insurance.
With regard to excess, NSW legislation is silent on this as well. I’ve done research on this because the legislation doesn’t specifically speak about excess, so I’d like to think the benefit principle applies here. You could argue the owner is responsible for the excess because they’ve benefited from the claim. In some of my research, there is also an argument that the owners corporation maintaining the insurance policy is liable for the excess. I would like to think the first applies in this claim, and if it was me on the committee in NSW, I would be be seeking that the owner first pays the excess and if it’s disputed, then obviously get advice from your strata manager specific to that.
This post appears in the February 2023 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.
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