Question: My strata unit had internal water damage from a leaking roof following a weather event. I’ve paid for the roof repair but been told the internal damage is my responsibility and I will only be reimbursed up to the amount of the Body Corporate insurer panel builder’s quote. Is this right?
My strata title unit, along with several others in the complex, had internal water damage from leaking roofs following a weather event. I have paid to have the roof repaired. The Body Corporate Insurer panel builder quoted about 8 months ago on the cost to repair the internal damage. I have now been advised by the BC insurer that I will have to pay and organise to have the internal repairs completed myself and they will only reimburse me up to the amount as per the panel builder’s quote. They are now imposing a limit on liability.
Despite my request, they have not provided a copy of their report/quote, plus the cost of any repairs will have increased since their quote. Where do we stand?
Answer: Some insurers are offering a cash settlement for claims and in some instances, this can be a benefit to clients, in other instances is it may not be beneficial to accept a cash settlement.
Insurer panel builders are experiencing significant delays following the Queensland and New South Wales storm/flooding event in 2022 which resulted in $5.2 Billion in insurance claims, with over 233,000 claims lodged. This event was a catastrophe for many people and businesses and is the second most expensive weather event in Australia’s history. The number one event was the Sydney Hailstorm in April 1999.
Issues with supply lines for construction materials has also exacerbated the delays for the construction industry.
In catastrophic events, insurers have limitations on the level of control they have over timeframes for contractors completing work for policy holders.
For this reason, some insurers are offering a cash settlement for claims and in some instances, this can be a benefit to clients, in other instances is it may not be beneficial to accept a cash settlement.
The main benefit in accepting such an offer is you may get the work completed much faster by sourcing a local builder that has availability to start works immediately.
Insurance repairs generally cost more than what you may get privately through a builder as insurers builders include project management costs and other contingencies. If, however, you are not able to find a quote lower than the limit of liability offered by the insurer, particularly given the quote is out of date and does not factor in increases to building costs, you should not accept the settlement offer by the insurer. In such instances, we recommend you request the insurer increase the settlement to factor in the higher cost or if not find a builder to quote and repair the work.
It is important to also understand the insurer does not warrant the repairs of builders they do not engage – any issues with workmanship will be a matter between you and the builder that the insurer does not become involved in. If the repairs required for your claim are complex or have a higher risk of workmanship issues down the track and you want the insurers guarantee of workmanship, you can decline the offer and ask the insurer’s repairer to conduct work.
If however, you are happy to engage your own builder, I would recommend first getting quotes from a builder to see if the settlement offer is fair and reasonable. If the quotes are above the insurers limit of liability, you should decline the settlement and ask the insurer to increase their settlement offer to the costs quoted or request they find an alternate repairer to complete the works.
You also have the right to ask for the quotes and reports associated with your claim and we recommend you refer the insurer to their obligations under the General Insurance Code of Practice which states:
- Section 79 If we offer a cash settlement under a home building policy, we will provide you with information to help you understand how they work and how decisions are made on cash settlements.
- Section 161 At your request, and subject to paragraph 163, we must give you — free of charge, access to any information that we relied on in assessing your application for insurance cover, or in handling your claim, or in responding to your Complaint. We must give you this information within 30 Calendar Days unless paragraph 82 or 151 applies.
If you are not happy with your claim, you can ask the claim is referred to dispute resolution – more information on this process can be found via our recent Dispute Resolution Webinar link. Likewise, if your policy is managed by an insurance broker, you can discuss your concerns with them and they should be able to provide advice on how to navigate your concerns and any disputes that arise from the claim.
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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