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WA Insurance Terms with the Upcoming Strata Reforms

Leonie Milonas, PSC Property Lync Insurance Brokers

This article discusses the changes to WA insurance terms with the upcoming WA Strata Reforms. The article has been provided by Leonie Milonas, PSC Property Lync Insurance Brokers.

Strata Titles Amendment Act 2018 (STAA 2018) has changed many terms and this includes the sections relating to insurance. In this article, I will be highlighting some of the new terminology we can expect and provide a comparison to the current Act.

In a recent article written by Shane White WA: May, Shall and Must – Terminology of the New WA Strata Legislation, Shane discussed how the use of the word Shall has been replaced with the word Must in these sections.

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Current Act – STA 1985 Reforms – STAAA 2018
S3 Terms Used
Building means a building or buildings shown on a strata plan		 S3 Terms used
Building includes structure
The term Building has been expanded to include structure. Previously from an insurance point of view, anything fixed too or forming part of the building or buildings – is considered part of insured property.
Not in the current STA S53 Terms used In the Insurance Division Building includes any building on the parcel for a scheme whether shown on the strata/survey-strata plan or not and also includes —
  1. proprietors’ improvements and proprietors’ fixtures forming part of the building including paint and wallpaper but excluding carpet and temporary wall, floor and ceiling coverings; and
  2. [deleted]
  3. anything prescribed as forming part of a building for the purposes of this definition, but does not include —
  4. fixtures removable by a lessee at the expiration of a tenancy; or
  5. anything prescribed as not forming part of a building for the purposes of this definition;
 S3 Terms used *New Term* Insurable Asset of a strata titles scheme —
  1. means —
    1. the common property of the scheme (including the fixtures and improvements on the common property); or
    2. the parts of scheme buildings that comprise lots in the scheme (including the paint and wallpaper); or
    3. anything included in this definition by the regulations; but (b) does not include —
      1. fixtures or improvements on the common property that are not themselves common property; or
      2. carpet and temporary wall, floor and ceiling coverings in a scheme building; or
      3. fixtures removable by a lessee at the expiration of a tenancy; or
      4. anything excluded from this definition by the regulations;
Insurable Asset is a new term that has been introduced into the insurance section of the reforms. The ‘Insurable Asset’, more commonly known as ‘Insured Property’ as referenced in insurance policies, is the property to be insured. More information on insurance may be contained within the regulations including clarification on common property fixtures and strata assets that are not shown on the Strata Plan.
54. Insurance of buildings and strata companies
  1. In this section — Strata company means a strata company for a scheme other than a single tier strata scheme. (1a) Subject to subsection (4) and section 103J, a strata company shall —
    1. insure and keep insured the building to the replacement value against fire, storm and tempest (excluding damage by sea, flood or erosion), lightning, explosion and earthquake; and
    2. effect and maintain insurance in respect of damage to property, death, or bodily injury for which the strata company could become liable in damages in an amount of not less than $5 000 000 or such other amount as may be prescribed in place of that amount.
 S97 Required Insurance
  1. A strata company must ensure that the following insurance is in place for the strata titles scheme —
    1. all insurable assets of the scheme must be insured against fire, storm and tempest (excluding damage by sea, flood or erosion), lightning, explosion and earthquake —
      1. to replacement value; or
      2. to replacement value up to, for an event of a specified kind, a maximum amount specified in the contract of insurance that is a reasonable limitation in the circumstances; and
    2. the strata company must be insured against damage to property, death, bodily injury or illness for which the strata company could become liable in damages to an amount of not less than $10,000,000 or if some other amount is determined under the regulations, that amount.
Within s97 – Required Insurance, the most obvious change is the increase in the requirement for ‘legal liability’ which has increased from $5m to $10m. Another new inclusion is insuring a maximum specified limit, applying to specified events in certain circumstances. An example may be an insurance policy with an imposed condition, such as e.g. flood cover, which is a specified amount and maybe a reasonable limitation under that circumstance. Whilst this is already occurring, it appears to have been acknowledged within the reform.

We received a few questions on this article in the comment section below and have addressed them in detail:

Am I correct in my understanding that currently residential strata policies only insure against insurable events such as fire, storm, tempest, lighting as required by STA 545(1a)(a)?

Most Residential Strata policies are typically written as an accidental damage cover not otherwise excluded (see your insurers PDS for the exclusions) under the policy, usually by insurer “Insured Property” section or policy 1.

What you have described is typically a Defined or Listed Event wording, which (excludes everything except what is covered), whereas Accidental Damage policy wording is broader.

To illustrate this, see the table below, which shows you the difference:

Defined/Listed Events Accidental Damage
Fire, storm, tempest, lightning (as per the STA 545(1a)(a) Covered Covered
Water damage from burst pipe Covered Covered
Window was smashed Covered Covered
Person stands on a paint tray and splatters paint all over their own contents as well as the walls and tiles that are part of the building Not covered Covered
Hot pot put on the benchtop causing benchtop to be burnt but not fire Not covered Covered
Dropped heavy object on floor damaging the tiles Not covered Covered

What about accidental breakages of common property? If it is an owner who accidentally cracked a few original tiles in his bathroom causing damage to other units, who pays for the excess?

We recommend that you contact your insurer to clarify if covered or not by their Policy, but most residential strata policies are accidental damage not otherwise excluded, therefore if an owner dropped an object thus cracking tiles in his bathroom by accident, this damage may be covered. However, if the tiles have cracked over a period of time then generally there would be no cover for the tiles as this may be regarded as maintenance, but damage to the unit(s) below may still be covered for the resultant damage.

Once known, the cracked tiles would need to be repaired & or waterproof the area quickly to minimise damage to the units below.

Regarding the excess, you need to refer back to your strata council or your strata manager. Generally, a Strata Company arranges the policy for collective strata insurance and therefore claims management is via the strata company unless the owners of the strata company have otherwise agreed.

Will the new STAA reforms require strata insurance to include insurance for accidental acts like smashing a common property window?

The new STAA 2018 reforms insurance requirements are based on similar requirements, as described above to the current WA Strata Titles Act 1985.

Finally check with your insurer, but usually, all glass including windows are covered that are on the common property or within a Lot. Please note there is no cover for glass that forms part of the Lot Owners Contents e.g. glass tables.

This post appears in Strata News #249.

Have a question about WA insurance terminology or something to add to the article? Leave a comment below.

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Leonie Milonas PSC Property Lync Insurance Brokers T: 1300 127 503 E: leonie@lyncinsure.com.au

Important note: The Regulations at time of writing have not yet been released for STAA 2018. The regulations will define further obligations and requirements and this is referenced in some sections above and throughout the Act.

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General Disclosure This article is prepared for informational purposes only, and is not insurance, financial or legal advice and should not be relied on as insurance, financial or legal ad¬vice. You should consult with a qualified insurance or legal advisor. PSC Property Lync Insurance Brokers is an Authorised Representative (AR 1235681) of Professional Services Corporation Pty Ltd (AFSL 305491).

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