Question: My apartment flooded due to a kinked pipe bursting. Should strata make an insurance claim and reimburse me for loss of rent and damage to my apartment?
I own an apartment in a 5 story development built in 2009. My apartment flooded from a burst pipe. The plumber reported the pipe had a kink in it which eventually caused it to break.
I have asked Strata to make an insurance claim. They do not agreement. The pipe only services my apartment however the faulty is not any fault of my tenants.
The situation has caused my prospective new tenants to get out of the lease. Waiting for the repair plus the time it will take to find a new tenant has resulted in a substantial loss of rent.
Please advise if my insurance claim is valid for both loss of rent and water damage to my unit.
Answer: In instances where there is a disagreement between the owner and committee over whether a claim should be lodged, an insurer should give precedence to insurable interest over committee expectation.
Strata Legislation in all states and territories has a requirement for a strata corporation to take out insurance in accordance with the applicable act.
Generally speaking, a lot owner who has contributed to insurance premiums for a policy covering property they own can demonstrate an insurable interest in the policy – this means in instances where there is a disagreement between the owner and committee over whether a claim should be lodged, an insurer should give precedence to insurable interest over committee expectation.
Where the owner has difficulty lodging a claim through the strata corporation the options available are:
- Refer the claim directly to the insurer and if they require you to deal through the strata corporation you should to enforce your insurable interest in the policy and request the insurer deals directly with you;
- In the event the insurer refuses to deal with you, you may go through the insurers dispute resolution processes (in their policy wording);
- Failing this you may decide to dispute the issue with the strata corporation through the processes recommended by Landgate: Guide to resolving strata disputes
In the case of a burst pipe, subject to the policy terms, conditions and exclusions, the insurer will generally cover “water damage” to property defined as “building” or “insured property” but exclude cover for finding and fixing the burst pipe (i.e. plumbing costs). Additionally, the lot owner is responsible for the excess. If the owner has other property damaged that is not considered building, such as carpet, the owner may need to also lodge a claim under their landlords insurance for this portion of the claim.
Strata insurance covers loss of rent where it can be substantiated by means of a signed agreement that the lot would have leased out. Loss of rent can only be claimed where damage to property covered by the strata policy (i.e. building) is damaged and this makes the lot uninhabitable. In some instances both the strata and contents insurer can be responsible for contributing to loss of rent if both building & contents (such as carpet) is damaged.
Loss of rent under a strata policy generally provides cover up to the point at which the property is re-tenanted.
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.
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