Question: For insurance purposes, is the breakdown of a washing machine that caused damage to the lot and the lot below considered an event? Who pays the excess?
I refer to Section 193(4) Excess in the Body Corporate and Community Management (Accommodation Module) Regulation 2020, or Section 122(4) of the Body Corporate and Community Management (Small Schemes Module) Regulation 2020 that state:
- 2 or more lots—the body corporate should pay the excess unless the body corporate decides it is reasonable for the excess to be paid by 1 or more of the affected lots
I am seeking clarification of what an “event” and “affect” means.
We have a situation where a washing machine breakdown caused a flood in a laundry with the water flowing onto a hallway carpet before seeping into and damaging the ceiling below.
The washing machine was replaced (damaged), the laundry floor cleaned (affected), and fans used to dry the carpet (affected).
Does this constitute an event occurring in both apartments and have both lots been affected?
Who is responsible for paying the excess, and does the body corporate committee have any responsibility in the matter?
Answer: Ultimately, the body corporate committee can exercise its judgment on the issue of excess.
The BCCM Act does not explicitly define what constitutes an “event”. However, it is generally understood that an event refers to a specific incident or occurrence that sets in motion a sequence of events leading to an insurance claim. In the scenario you described, where a washing machine breakdown caused flooding that affected another lot, in my view this situation can indeed be considered as a single event since it originated from a singular cause.
Regarding what it means to be “affected,” in my view, it involves any lot that has experienced damage or any form of impact directly resulting from the event. In this case, both the lot containing the washing machine and the lot below it, which suffered water damage to the ceiling, should be considered affected. The primary lot experienced direct damage, while the secondary lot was indirectly impacted through water damage originating from the first lot.
Given this situation, the BCCM Act allows the body corporate committee some discretion in deciding who is responsible for paying the insurance excess. This decision must be based on reasonable grounds, taking into account all circumstances surrounding the event. Factors to consider may include whether the event was foreseeable, whether the washing machine owner could have taken measures to prevent the incident and the extent to which each lot was affected.
In this instance, it is my view that it could be viewed as reasonable for the owner of the lot with the broken washing machine to bear the responsibility for paying the excess, given that the origin of the damage was within their control. Alternatively, the body corporate could also opt to pay the excess, particularly if it determines that this approach is more equitable or if the cause of the breakdown was not due to negligence on the part of the lot owner.
Ultimately, the body corporate committee has the option to exercise its judgment on this issue.
This post appears in the November 2024 edition of The QLD Strata Magazine.
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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