WA: Is building insurance suitable for a WA strata scheme?

This article discusses WA strata building insurance requirements and why basic building insurance may not meet legal obligations for a strata scheme.

Question: Our small self managed scheme arranged new insurance with a company that does not offer strata title insurance. The type of cover is ‘building insurance’. Is this the right insurance for our scheme?

I am the Treasurer/Secretary of a self managed six lot complex in WA. Our chairperson arranged new insurance as we have found our previous insurance too expensive. The new insurance is with a company that does not offer strata title insurance. The type of cover is ‘building insurance’. I note our previous insurance was ‘strata title residential insurance’. Is the new insurance policy relevant to our scheme?

Answer: Given the complexities involved in selecting appropriate strata insurance, I recommend seeking the advice of a reputable Insurance Broker or appointing an SCA (WA) Accredited Strata Manager to assist you with your legislative responsibilities and duties.

While we cannot comment on the specifics of individual policies, I can provide some general information regarding strata insurance in accordance with the Strata Titles Act 1985 of Western Australia.

It is important to note that the choice of strata insurance requires careful consideration, as the Act stipulates certain requirements for adequate coverage.

As the strata company comprising all lot owners, you have a legal obligation to ensure that all insurable assets within the scheme are insured for their replacement value.

It is crucial to understand that all owners, collectively or individually, bear joint and several financial obligations in the event of any shortfall if the sum insured or coverage proves insufficient to cover the actual replacement value.

In accordance with the Act, specifically sections 97 – 99, the 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. The insurance coverage should be either:
   
   1. up to the replacement value, or
   2. up to the replacement value for specified events, with a maximum amount specified in the insurance contract that is deemed reasonable in the circumstances.
2. The strata company itself must be insured against property damage, as well as death, bodily injury, or illness for which it could be held liable in damages. The minimum required coverage for liability is $10,000,000 unless a different amount is determined under the regulations.

Given the complexities involved in selecting appropriate strata insurance, I recommend seeking the advice of a reputable Insurance Broker or appointing an SCA (WA) Accredited Strata Manager to assist you with your legislative responsibilities and duties. They can provide expert guidance and ensure that your insurance policy aligns with the requirements of the Strata Titles Act.

It is advisable to request written assurance from the broker confirming that the insurance policy meets the specific obligations outlined in the Act.

Please keep in mind that this response is of a general nature and should not be considered legal or professional advice.

This post appears in Strata News #665.

Liz Florence
Abode Strata
E: abode@abodestrata.com.au