Question: What options are available if an owner’s insurance claim is denied on the basis of poor maintenance by the body corporate?
This article has been submitted by a QLD owner. The information is also applicable for our NSW audience.
Following the big storm in Brisbane on 9 March, I noted water ingress down the wall and vent pipe casing of my bedroom ensuite. A short time after, there was evidence of water damage.
A plumber reported that the ingress was caused by penetration of the sewer vent pipe flashing on the roof. A temporary fix was undertaken to prevent further leaks.
An assessment of the damage to my ensuite identified that a full refurbishment is required. I initiated a claim for damages against the body corporate insurance policy.
The claim was denied on the basis of “poor or inadequate maintenance” on the part of the body corporate: “gradual deterioration, wear and tear, and faulty workmanship, design and specification” — i.e. not attributed to a single event.
What avenues of redress are available to me?
Answer: A denied water damage claim can often be challenged, especially if the damage was caused by a major storm. Review the policy, insurer’s reasoning, and reports — and seek advice from your broker or AFCA, if needed.
When a claim is denied, it can be understandably frustrating — but it’s important to carefully assess the reasons for the denial and explore the appropriate avenues for redress.
While the insurer has denied the claim based on common exclusions such as “gradual deterioration, wear and tear, faulty workmanship, design or specification,” it’s important to understand that such exclusions do not always mean the claim is not valid. These types of denials are frequently challenged — and successfully so — particularly when there is a clear triggering event (in this case, a significant storm).
I recommend reviewing the following resources, which outline important considerations for strata insurance water damage claims:
If you lodged your claim through an insurance broker, your first step should be to seek their advice on whether the denial is fair and in line with the terms of the policy. Brokers are well-placed to assess the insurer’s reasoning and help you challenge the decision if necessary.
It’s also important to obtain and review any reports relied on by the insurer (e.g. from a plumber, assessor, or engineer). Consider:
- Does the report accurately describe the cause of the damage?
- Were the alleged maintenance issues previously known to or raised with the body corporate?
- Did the storm contribute significantly to the loss — and if so, was it the primary or proximate cause?
In many cases, claims are denied based on exclusions such as “gradual deterioration” or “poor maintenance,” but if a major storm was a key factor causing the damage, the exclusion may not apply in the way the insurer has claimed.
If you remain unsatisfied after internal review or reconsideration by the insurer, you may lodge a dispute with the Australian Financial Complaints Authority (AFCA), which is free and impartial.
If the cause of the water ingress relates to an element of common property, it may be appropriate to consider whether the body corporate has a responsibility under the Body Corporate and Community Management Act 1997 (BCCM Act) or similar legislation in your state to maintain that area in good condition. In such cases, it’s not uncommon for lot owners to raise concerns or questions about whether maintenance obligations were met.
If the body corporate concludes that there may have been a lapse in maintenance which contributed to the loss, one avenue available could be to lodge a public liability claim under the strata insurance policy. Public liability sections typically do not exclude claims arising from poor maintenance, unlike the property section.
These situations can be challenging for both lot owners and committees, but a thoughtful, cooperative approach helps ensure all parties meet their responsibilities while working toward a fair outcome.
This post appears in Strata News #751.
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.