Question: Until recently, the strata manager has never notified us about our strata insurance options. Is this now mandatory in the new act?
Until recently, the strata manager has never notified our strata committee about strata insurance options. Is this now mandatory in the new act?
I see in the current act at section 166, that it is mandatory to be notified.
What are the ramifications of not being notified by the strata manager when there could be different financial outcomes if the strata committee had been informed of its options?
Answer: If the strata manager decides on an insurance policy on behalf of the owners corporation, they run the risk that they could be held professionally liable if the option chosen is not appropriate.
You refer to Section 166, which states that A strata managing agent must provide the owners corporation with not less than 3 quotations from different providers for each type of insurance proposed by the agent to the owners corporation or provide written reasons to the owners corporation if less than 3 quotations are provided.
Best practice is for the committee to decide on the insurance option in the best interest of the owners corporation based on the quotes provided.
If the strata manager decides on an insurance policy on behalf of the owners corporation, they run the risk that they could be held professionally liable if the option chosen is not appropriate for the owners, particularly in circumstances where there is a claim that is not covered by the strata managers chosen option and if given the choice, the committee would have chosen a different option that did provide cover.
Additionally, as most strata managers receive commissions for arranging insurance, this conflict of interest should be appropriately managed. This includes placing the buying decision for insurance in the hands of the committee.
If you believe the arrangement of insurance is something the committee should be more actively involved in, this should be discussed with the strata manager. This may include a review of your strata management contract and any terms and conditions which provides that the strata manager has authority to make a buying decision on behalf of the owners corporation.
This post appears in the February 2022 edition of The NSW Strata Magazine.