Question: Can our committee cancel our flood insurance? Although we haven’t had a flood event in almost 18 years, there is a nearby tidal creek and wetland area.
Our committee is considering cancelling our flood insurance coverage.
Although there has not been a flood event in almost 18 years, the complex has a nearby tidal creek and wetland area on one boundary and a wetland area on another boundary.
Can the committee make this decision, or is it a restrictive issue requiring general meeting resolution?
Answer: If the body corporate has any recognised risk of flooding and can obtain flood insurance, it is obliged to have flood insurance irrespective of the costs of that insurance.
This is a common issue as many insurance premiums for bodies corporate have increased when they are considered at risk of flood. Committees then consider reducing the coverage under the insurance policy to reduce the premium costs.
The body corporate has various insurance obligations pursuant to the module, which includes (when a builder format plan) each building included in the scheme for damage and reinstatement.
Damage is defined to include any damage from earthquake, explosion, fire, lightning, storm and water.
There are mixed adjudications on whether flood insurance is required – i.e. whether it amounts to water damage.
For example, in Beach Meet [2018] QBCCMCmr 39, the adjudicator relevantly provides (in circumstances where flood insurance could not be obtained):
The fact is, it is not a legislative requirement that flood cover be obtained and in any event, flood cover is not available for the scheme at the present time in the present circumstances.
However, in Winnipeg Grange [2013] QBCCMCmr 278 the adjudicator relevantly provides:
Section 110 of the Small Schemes Module states that damage means, among other things: “… lightning, storm, tempest and water damage …” While flood is not specifically mentioned I am satisfied that “water damage” covers damage from water in different ways and includes flooding…
I am satisfied that it is unreasonable for the body corporate to fail to obtain flood insurance in an area recognised as a flood risk.
Accordingly, my view is that if the body corporate has any recognised risk of flooding and can obtain flood insurance, it is obliged to have flood insurance irrespective of the costs of that insurance.
Even if there was not a flood obligation, and there was a risk of flooding, it would be foolish for the body corporate not to have flood insurance given the impact and remedial costs if a flood were to take place.
Todd Garsden Mahoneys E: tgarsden@mahoneys.com.au P: 07 3007 3753