These responses to lot owner’s questions about who pays the excess on a Body Corporate insurance claim have been answered by Tyrone Shandiman, Strata Insurance Solutions and Chris Irons, Hynes Legal.
Jump directly to the QUESTION you are after:
- QUESTION: I had a leak in the roof which was repaired, but I am wondering who is required to pay for the damage in the internal ceiling? I’m looking for an example where no insurance claim would exist.
- QUESTION: For a garage door that services only one lot, is it the body corporate or the lot owner who is responsible for any insurance excess related to a repair of the garage door?
- QUESTION: Storm damage has resulted in a water stain on my ceiling. The Body Corporate has advised me that I can claim through the Body Corporate insurance to have the ceiling repainted but I’m responsible for the excess.
- QUESTION: After my hot water system was repaired by a plumber, a connection blew and both my unit and the unit downstairs suffered water damage. Am I liable for the Body Corporate insurance excess?
- QUESTION: I’ve had a pipe leak in the bathroom leaving extensive damage that was covered by Body Corporate insurance. Who pays the water damage excess?
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Question: I had a leak in the roof which was repaired, but I am wondering who is required to pay for the damage in the internal ceiling? I’m looking for an example where no insurance claim would exist.
My unit is one of 4 under a small lots module.
I had a leak in the roof which was repaired, but I am wondering who is required to pay for the damage in the internal area resulting from the water ingress. The ceiling is the area with the remaining damage.
I’m looking for an example where no insurance claim would exist.
Wouldn’t section 281 of the BC Act suggest that if a BC as a maintenance issue or lack of it, such as the roof leak that damaged the inside unit, wouldn’t the BC also be responsible for the internal damage. Why would that become a unit owners issue where a building format plan exists.
I don’t understand why the BC responsibility would be limited to the roof fix as the boundary. The roof leak caused internal damage. This scenario is also under a BC in the small lots module in QLD.
Is this a BC responsibility or lot owners?
Answer: You’d need to firstly demonstrate the body corporate had failed in responsibility to maintain common property.
You’d need to firstly demonstrate the body corporate had failed in responsibility to maintain common property. That is no easy task and is rarely as straightforward as it sounds. You need evidence to back up any assertions – it’s not enough to simply say “it’s body corporate responsibility” and leave it at that.
With that in mind, generally speaking yes, the body corporate is responsible for maintaining common property and it follows that if they haven’t maintained then they can be responsible for resultant damage. An adjudicator can order either that repairs get carried out or that a payment be made to for reimbursement to the applicant for repairs they carried out, under section 281. There are monetary caps in either case.
You say you are ‘looking for an example’. You can research for examples – there are several – of this kind of thing on the Australasian Legal Information Institute.
A quick note on the term ‘damages’ – there’s no capacity for an adjudicator to make an order in relation to something such as loss of rent in an investment lot or ‘damages’ for loss of income. Those will require legal proceedings. The adjudicator’s power is limited to repairs.
This post appears in Strata News #357.
Chris Irons
E: [email protected]
P: 07 3193 0500
W: Hynes Legal
Question: For a garage door that services only one lot, is it the body corporate or the lot owner who is responsible for any insurance excess related to a repair of the garage door?
Our garage door is on a boundary separating the lot from common property. If it’s the Body Corporate’s responsibility to maintain the garage door, whose responsible for the payment of any insurance excess related to a repair of the garage door? In this instance, the garage door services only the lot so is it the Body Corporate or the Lot owner who pays the excess?
Answer: The owner of the lot is liable to pay the excess unless the body corporate decides it is unreasonable in all the circumstances for the owner to bear the liability.
Working under the assumption your body corporate is a “Standard Module” Section 184 of The Body Corporate and Community Management (Standard Module) Regulation 2008 would apply.
For an event affecting only 1 lot, the owner of the lot is liable to pay the excess unless the body corporate decides it is unreasonable in all the circumstances for the owner to bear the liability.
This post appears in Strata News #341.
Tyrone Shandiman
Strata Insurance Solutions
T: 07 3899 5129
E: [email protected]
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. This information is designed as a basic guide with relation to cover and you should refer to your Policy Schedule and Product Disclosure Statement for all terms and conditions related to cover under any insurance policy. Shandit Pty Ltd T/As Strata Insurance Solutions is a Corporate Authorised Representative (No. 404246) of Insurance Advisernet Australia AFSL No 240549, ABN 15 003 886 687.
Question: Storm damage has resulted in a water stain on my ceiling. The Body Corporate has advised me that I can claim through the Body Corporate insurance to have the ceiling repainted but I’m responsible for the excess.
I have recently had storm damage resulting in a water stain on my ceiling.
The Body Corporate has been advised and has repaired the roof and guttering. It has advised me that I can claim through the Body Corporate insurance to have the ceiling repainted but I would be personally responsible for the excess.
Is this correct? Because they have taken responsibility for the roof repair but not the resulting interior damage I thought they would pay the excess?
Answer: The legislation is pretty clear about the liability for the excess and if it’s only for your lot, it’s your responsibility.
Section 184 of the Standard Module (equivalent provisions of the other Modules) provides for excess. The key provisions are subsections (3) and (4). Subsection (3) provides that ‘For an event affecting only 1 lot, the owner of the lot is liable to pay the excess unless the body corporate decides it is unreasonable in all the circumstances for the owner to bear the liability’.
The section gives an example immediately afterwards to illustrate this further, which provides some guidance on these concepts. Examples in legislation are exactly that – examples. Not literal gospel. What is ‘reasonable’ and thus, ‘unreasonable’, will always depend upon the particular circumstances.
To look at this another way: the legislation is pretty clear about the liability for the excess and if it’s only for your lot, it’s your responsibility, but if you feel it’s unreasonable to do so you can ask the body corporate to reconsider the liability for the excess. That might happen by writing to the committee or if necessary, putting a motion to a general meeting.
Either way, the responsibility will be on you to demonstrate why you shouldn’t pay the excess, and based on your particular circumstances.
This post appears in Strata News #329.
Chris Irons
E: [email protected]
P: 07 3193 0500
W: Hynes Legal
Question: After my hot water system was repaired by a plumber, a connection blew and both my unit and the unit downstairs suffered water damage. Am I liable for the Body Corporate insurance excess?
My hot-water system was replaced by the building’s preferred plumber. After he completed the works and left, a connection blew and water flooded my unit. There was damage to carpets, furniture, curtains etc that is being covered by my contents insurance. There is also some damage to built-in shelving and bubbling/flaking of wall paint. Water also caused some damage to the unit below mine. I don’t know what the value of this damage is.
The BC Manager has advised that if I submit a claim to the Body Corporate’s insurer, I will be required to pay the Body Corporate insurance excess of $2,500, as the cause of the damage to other property originated in my lot. I will be advised in due course whether the claim has been processed once the claim form is submitted and whether the Body Corporate insurance excess is, in fact, payable.
It seems to me the damage was caused by the plumber’s actions, either due to negligence, accidental or other.
Will I have to pay the Body Corporate insurance excess by just submitting the claim form, regardless of whether the insurer processes the claim or not?
Is it likely I will I have to pay this large excess even though it is not my fault? I don’t know if there is even $2500 damage to my shelving and walls.
Am I liable for the damage to the unit below?
Would the BC insurer likely claim all of the damage to both lots off the plumber, and me not pay the Body Corporate insurance excess?
In other words, I don’t know if it is financially worth my while to submit a claim with BC insurer given the large excess.
Answer: It will be a matter for the body corporate to decide on the payment of the Body Corporate insurance excess.
Section 184 of the Body Corporate and Community Management (Standard Module) Regulation 2008 provides a specific reference to who is responsible for the excess. (see below)
As the claim has caused damage to 2 lots, the owner of a lot is only liable to pay the excess if the body corporate decides it is reasonable in all the circumstances for the Body Corporate insurance excess to be paid for by the lot owner. If the owner has not already done so, they may wish to put a case forward to the body corporate outlining why they believe in the circumstances it is not reasonable for them to pay the excess, (for example the claim was from an unforeseen event following an upgrade of a water system). Ultimately, however, it will be a matter for the body corporate to decide on the payment of the Body Corporate insurance excess.
Excess payments are usually made in the following ways:
- The payment is either deducted from any settlement the insurer pays; or
- If the insurer engages a builder/contractor, the excess is payable to the builder/contractor before works start.
If repairs are below excess, the insurer will close the claim without proceeding and the owner can request to see a copy of the quotes before the excess is paid.
If the insurer believes the contractor who installed the water system is liable for the damage, they will pursue a recovery action against the contractor and usually the insurer will refund the excess if they are successful in their recovery – we recommend checking this with the insurer or strata manager as policies will differ from insurer to insurer with regard to Body Corporate insurance excess.
This post appears in Strata News #271.
Tyrone Shandiman
E: [email protected]
Question: I’ve had a pipe leak in the bathroom leaving extensive damage that was covered by Body Corporate insurance. Who pays the water damage excess?
Recently I’ve had a pipe leak in the bathroom leaving extensive damage that was covered by body Corporate insurance. However, the $500 excess had an extra $200 water damage excess.
Is the water damage excess covered by the body corporate or the individual lot owner? The water leak was not a hot water pipe.
Answer: If the pipe and damage is within 1 lot, the excess would usually be paid for by the lot owner.
In Queensland, Section 184 of the Body Corporate and Community Management (Standard Module) Regulation 2008 provides a specific reference to who is responsible for the excess.
- For an event affecting only 1 lot, the owner of the lot is liable to pay the excess unless the body corporate decides it is unreasonable in all the circumstances for the owner to bear the liability. Example — If a shower screen is damaged in a lot and an insurance claim is made under the body corporate’s reinstatement insurance, the owner of the lot would be liable under subsection (3) to pay the excess unless the body corporate decides it is unreasonable for the owner to be required to pay it. However, if there is a fire within a lot caused by a short circuit in electrical wiring located in an internal partition, the body corporate might decide it would be unreasonable for the owner to be required to pay the excess.
- For an event affecting 2 or more lots, or 1 or more lots and common property, the body corporate is liable to pay the excess unless the body corporate decides it is reasonable in all the circumstances for the excess to be paid for by the owner of a particular lot or to be shared between owners of particular lots, or between the owner of a lot and the body corporate, or between owners of particular lots and the body corporate.
If the pipe and damage is within 1 lot, the excess would usually be paid for by the lot owner.
This post appears in Strata News #249.
Tyrone Shandiman
Strata Insurance Solutions
T: 07 3899 5129
E: [email protected]
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. This information is designed as a basic guide with relation to cover and you should refer to your Policy Schedule and Product Disclosure Statement for all terms and conditions related to cover under any insurance policy. Shandit Pty Ltd T/As Strata Insurance Solutions is a Corporate Authorised Representative (No. 404246) of Insurance Advisernet Australia AFSL No 240549, ABN 15 003 886 687.
Have a question about body corporate insurance excess or something to add to the article? Leave a comment below.
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We have serious maintenance problems and a great deal of repair and replacement is requires including a replacement roof for 200 plus lots. The committee is focused on increasing the Sinking fund to upgrade a large pool with waterslides for the benefit of increased short term rental. 14 commercial lots pay for 10% of all BC funds by lot entitlement but are not permitted to use the pool. What can we do to make sure necessary maintenance has to be done and 35 unauthorized air cons are identified and disconnected from common power. We have a group of 7 lot owners
for a class action if possible. Help please.
Hi Susan, not sure if your ‘help please’ comment means you’re looking for more parties to join your action or if you’re seeking some advice. If it is the latter, I would be happy to discuss options with you.
I have a question i had a leak from a garden bed in common area which was never maintained in 14yrs i have been here. The damage it caused to my fixtures and fitting is 7,000 i am talking walls have to come down i have mould in the walls. Body corporate has 5,000 excess which i have to pay stating 184 subsection 3. Lets not forget the leak came from Common area that was never maintained by body corporate. Why am i having to pay 5,000 excess. Damage is only on my lot.
I response to the First Question:
From a NSW perspective (and without familiarity with the Queensland legislation), it appears to me that the starting point is that a body corporate has a duty to maintain common property (I cannot immediately locate it but assume that it s there).
Under section 184, the test for who pays the excess is one of reasonableness and the Standard Module says ‘For an event affecting only 1 lot, the owner of the lot is liable to pay the excess unless the body corporate decides it is unreasonable in all the circumstances for the owner to bear the liability’. I assume that, in making that decision, the body corporate must act reasonably.
If the body corporate has a general duty to repair and maintain common property, here the damage appears to have occurred as a result of a failure by the owners corporation to repair of the roof and guttering which, as between owners corporation and lot owner would mean that it resulted from a failure by the owners corporation to comply with its statutory duty. I would assume that the pwners corporation should be liable to reimburse the lot owner for the full extent of the damage which has been caused by that breach. It in turn may be able to obtain indemnity for that amount (less the excess) from its insurer.
The Standard module also says in several places ‘The body corporate is liable to pay any contribution that has to be made to the cost of reinstatement or repair because the reinstatement insurance is not for the full replacement value of the insured property.’ I would have thought that the existance of an excess provision in its insurance policy means that ‘the reinstatement insurance is not for the full replacement value of the insured property.’ so that the body corporate would be liable to pay the excess as a ‘contribution that has to be made to the cost of reinstatement or repair.’
In addition the Act says:
281 Order to repair damage or reimburse amount paid for
carrying out repairs
(1) If the adjudicator is satisfied that the applicant has suffered
damage to property because of a contravention of this Act or
the community management statement, the adjudicator may
order the person who the adjudicator believes, on reasonable
grounds, to be responsible for the contravention—
(a) to carry out stated repairs, or have stated repairs carried
out, to the damaged property; or
(b) to pay the applicant an amount fixed by the adjudicator
as reimbursement for repairs carried out to the property
by the applicant.
Example—
A waterproofing membrane in the roof of a building in the scheme
leaks and there is damage to wallpaper and carpets in a lot included in
the scheme. The membrane is part of the common property and the leak
results from a failure on the part of the body corporate to maintain it in
good order and condition. The adjudicator could order the body
corporate to have the damage repaired or to pay an appropriate amount
as reimbursement for amounts incurred by the owner in repairing the
property.
I cannot see what defence the owners corporation has to the lot owners claim for full reimbursment, if only in terms of reasonableness (but I say this as a foreigner without familiarity with the legislation).
This response from Chris Irons, Hynes Legal:
Thanks for your comment Richard. Water ingress issues are always challenging, regardless of which State legislation we’re talking about, as the source of the ingress is often unclear. You can sometimes have different experts, such as engineers or plumbers, give two opposing views on source and therefore responsibility. Which is why each dispute about it must always be resolved on its merits.
The body corpora enters into the insurance policy with an understanding on an agreed excess. If the excess is nil then an increased premium is laid but all members of the bc are covered.
Because the bc takes the risk of excess based on the premium to be paid why should bc members be penalised by forcing them to pay excess
I believe that the excess should be paid by bc. The excess agreed on when entering the policy will reduce the premium when compared to no excess so by agreeing the excess the bc is saving all bc members an increased premium and the bc paying the excess would be considered reasonable in my opinion
Hi Chris
Great article – thank you for sharing. I thought in this instance if the leak is coming from a roof that is maintained by the body corporate, the event affects only 1 & common property and thus meaning section 184 (4) could apply and the body corporate would be responsible for the excess.
I would be interested to hear your thoughts?
Tyrone Shandiman
Strata Insurance Solutions
http://www.stratainsurancesolutions.com.au
Thanks Tyrone and Robert
We’ve received this response from Chris Irons, Hynes Legal:
Thanks for your comments. While the legislation provides for particular circumstances, this should always be read in the context of each individual case. Each case, and indeed each building, is different as is the cause of any leak. The legislation is there to provide guidance to the body corporate and owner to make a decision about payment responsibilities. If the parties dispute each other’s interpretations of that, that’s when further steps have to be taken to resolve, based upon expert advice.