This article discusses whether a strata insurance premium increase after arson can be charged to one lot, explaining when the cost must be shared and when it may be passed on.
Question: After an arson attack on one shop, our complex’s commercial strata insurance premium will rise. The insurer advised that the increase is specifically due to the arson attack. Can the increase be passed onto the affected lot?
Answer: Generally, increased insurance costs must be shared across all lot owners as part of the general obligations of the owners corporation.
In Victoria, Section 23A(3)(a) of the Owners Corporations Act 2006 provides that an owners corporation may levy a lot owner a fee to cover the cost of an excess amount or an increased insurance premium, but only if the claim was caused by:
- a culpable or wilful act, or
- gross negligence of the lot owner, their lessee, or their guests.
In this instance, while you acknowledge the insurer has attributed the premium increase to the arson attack affecting one of the shops, Section 23A(3)(a) only takes effect where the arson (or other event leading to the claim) can be directly linked to the culpable or wilful act or gross negligence of a person in one of the categories above.
Unless the arsonist can be clearly identified as being the lot owner, their lessee, or their guest—and further, that their conduct meets the legal threshold of being culpable, wilful, or grossly negligent—the provision would not apply. This is a high bar to meet, and mere suspicion or general attribution of risk would likely be insufficient to justify levying the increased premium to that specific lot.
Therefore, unless clear and admissible evidence exists linking the arsonist to one of those parties and showing the necessary level of fault, the increased insurance costs must be shared across all lot owners as part of the general obligations of the owners corporation.
This post appears in the August 2025 edition of The VIC 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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