Question: Our owners corporation manager told us we didn’t need mechanical breakdown insurance, then quoted $60,000 coverage the following year. We only have an electronic gate. Do we need it?
We are a set of townhouses in Victoria with an electronic gate. Our owners corporation manager told us that we did not need mechanical breakdown insurance, and the next year included $60,000 in mechanical breakdown coverage. The increase in the premium means more commission for the owners corporation manager.
We have no lifts or escalators, so we cannot see why we need this insurance in our policy. The electronic gate motor was recently replaced at $2,000 and is under a service contract.
We have garage doors and split air conditioners attached to each individual unit, which we believe are the lot owner’s expense.
We contacted our insurance company but were directed back to the owners corporation manager. We would appreciate some independent advice.
Answer: The recommendation to include mechanical breakdown insurance may be valid even with only an electronic gate.
As you have a shared electronic gate, it is wise to consider the broker’s recommendation to include machinery breakdown insurance. It is possible that the recommendation to incorporate the machinery breakdown portion occurred following an updated insurance valuation report or due to your previous claims history, which would have been considered for your upcoming renewal.
It is noted that should the owners corporation fail to take out insurance for a known piece of equipment on site requiring insurance, this can potentially lead to expensive legal action for failing to take action to insure an item that can potentially fail, causing loss, injury or in some instances, death.
In terms of commission, this is an item that you can speak to your owners corporation manager about, and you may be able to negotiate that commissions are excluded from your management services for insurance. Your manager may be willing to consider this and discuss the parameters of their management service with you. Commission is usually payable, as the manager is the main liaison for all insurance claims within an owners corporation. This takes the task of addressing all insurance matters away from the committee and allows your professional manager to handle the claims through your appointed broker.
If you are concerned about the inclusion of the machinery breakdown and the particulars of the insurance coverage, it is strongly suggested that you read the product disclosure statement provided with the renewal documentation, or request it at any time from your owners corporation manager. The product disclosure statement provides all the relevant information in relation to the insurance product that the owners corporation has purchased.
This post appears in Strata News #796.
Sim Firns
Bluestone OCM Pty Ltd
Sim.firns@bluestoneocm.com.au
P: 03 8535 2770
Isn’t the real question here “Why has the OC Manager and the Broker included $60k insurance coverage for mechanical breakdown of a single gate?”. Where is the valuation that substantiates this level of cover? How did the broker arrive at an amount of $60k? That’s a pretty serious gate if it needs $60k of coverage and there is nothing else that requires coverage for mechanical breakdown. Something doesn’t add up here.