WA: After several plumbing failures and rising premiums, what is the best way to minimise future water damage claims?

Question: After several plumbing failures that have to lead to an increase in insurance premiums, what is the best way to minimise future events?

We’ve had several plumbing failures leading to damage to various apartments. This has led to increased premiums and deductibles and our Broker is now only able to source one insurer.

We have sought to minimise future events by seeking to get all apartments to adopt a standard device and turn the water off to their apartment when away for 3 days or more.

We are looking to update the Strata Rules.

1. Is there any standard wording that we can use?
2. Should we include an annual / Bi-annual for access to inspect?
3. Can we require the Owner, should they fail to comply so that the Strata’s insurer may seek redress from the owner?

All recommendations would be appreciated.

Answer: The best way from an insurance perspective to encourage owners to conduct preventative maintenance is for the insurer to impose specific excesses.

Part of this question is a strata management question. Around the writing of bylaws, obviously, that’s outside of the scope of an insurance broker. I will just say that you have to be careful as a Strata Corporation that you’re not imposing certain requirements on how an owner maintains their lot. That is the owners right and responsibility to do so. I’ve seen in the past owners corporations and strata corporations that have tried to impose such requirements and they’ve been challenged in the relevant commissioner’s office. So be careful with that component of how you write the bylaw and seek legal advice.

The best way from an insurance perspective to encourage owners to conduct preventative maintenance is for the insurer to impose specific excesses. If there’s a $5000 or $10,000, water damage excess for the pipes, and as a strata Corporation you encouraged owners to install shut off devices and water sensing devices, an owner that is looking to not pay that excess would obviously seek to install and follow those recommendations of the strata company.

When it comes to the question of ‘Can the insurer pursue an owner for a recovery of a claim in their lot because they didn’t install the sensors?’, the short answer is no. They can’t and you need to remember that an owner is an insured party under a policy. Just as the insurer couldn’t pursue you because you failed to maintain your pipe in your house, and they pay the claim out, the insurer also cannot pursue recovery from an owner that is an insured party under the policy. They can for tenants, and they can for non-insured parties, but they simply can’t do it for owners for the very reason that they have an insurable interest.

Tyrone Shandiman
Strata Insurance Solutions
E: tshandiman@iaa.net.au
P: 07 3899 5129

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 Advisernet Australia AFSL No 240549, ABN 15 003 886 687.