Hot water system leak: Who pays the strata insurance 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.