Question: Our retirement village operator insures our owners corporation under a portfolio policy covering multiple villages, but our manager says we need stand-alone policies. Does a portfolio policy comply with the Act?
I am a lot owner and committee member in a retirement village with an owners corporation. Under our management agreement, the village operator obtains the insurances required by sections 59 and 60 of the Owners Corporations Act 2006 (the Act) as part of a portfolio insurance program covering multiple retirement villages and other facilities such as aged care. Our owners corporation is listed as a named insured on those policies.
Our owners corporation manager said that portfolio policies do not meet the requirements of the Act, and that we should have stand-alone policies in the name of the village. We are unable to see how anything in the Act supports this contention. This change would result in considerably higher insurance premiums.
Answer: A portfolio insurance policy can meet the requirements of the Act, but owners should understand how shared policy limits operate.
Owners corporations are required to take out insurance in accordance with Division 6 (Insurance) of the Act. While section 59 and section 60 prescribe what must be insured and the basis of cover required (including full replacement value and liability risks), the Act does not stipulate the form of the insurance arrangement or require placing the insurance under a stand-alone policy for each individual owners corporation.
In circumstances where an owners corporation is a named insured under a portfolio insurance arrangement, this alone does not indicate non-compliance with the Act.
Where an owners corporation manager contends that a portfolio policy does not meet legislative requirements, we recommend requesting clarification as to the specific deficiency identified, namely, how the current policy is said to fail to comply with section 59 or section 60 of the Act.
There is no legislative requirement that an owners corporation must hold an individual policy rather than being insured under a shared or portfolio arrangement. That said, care should be taken to understand how policy limits operate. For example, it is important to confirm whether limits such as public liability apply separately to each named insured or whether they are shared across multiple insured parties, as shared limits may result in insufficient cover.
It is also worth noting that where insurance is arranged on a portfolio basis, the claims experience and risk profile of other insured parties may impact the owners corporation’s future premiums, terms, and availability of cover for all participants in the program.
This post appears in Strata News #800.
Sarah Mumford
BAC Insurance Brokers
E: sarahm@bacbrokers.com.au
P: 02 9360 2244
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