We received a question from a WA lot owner about choosing a strata insurance company. Who chooses the contractor? The following response has been provided by Whitbread Insurance Brokers.
Question: We can’t agree on a strata insurance company. If we don’t insure the property by the due date, who will be liable for any damage caused while we don’t have a consensus?
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I am in a strata plan of 4 townhouses. I don’t want to insure with the 3 others’ strata insurance company choice. Their cover is more expensive than the option I have proposed. If we don’t make a choice and insure the property by the due date, will I be liable for any damage caused to them whilst we don’t have a consensus?
Answer: If the owners do not have any cover whilst they are coming to a consensus on insurance, then any and all of the owners of the Strata Plan may be held liable in the event that something happens during this time.
If the owners do not have any cover whilst they are coming to a consensus on insurance, then any and all of the owners of the Strata Plan may be held liable in the event that something happens during this time. For example, if someone falls in the common area and is seriously injured – they may take legal action against the Strata Plan. In the event that there is no Strata policy in place, each of the owners can be held responsible (not just the owner delaying policy placement) and it would be their responsibility to defend any action at their own personal expense.
Equally, if a specific owner delays placement of insurance cover and there is damage to another townhouse in this “insurance gap”, then it is expected that the owner who delayed the insurance placement may be held responsible for any losses due to the fact there is no policy in place to reimburse the townhouse owner’s losses.
Ensuring you maintain existing cover
Generally speaking, in order to ensure the property is covered by the current Insurer at renewal, the Owners Corporation should provide confirmation to the Insurer that the policy is going to be renewed by the owners on or prior to the due date.
The Owners Corporation will need to check with the strata insurance company what the timeframe is to remain covered, as it will depend on when the Insurer is expecting to be paid. Some Insurers may only give the client 14 days to pay the premium for cover to remain in place. Owners should obtain confirmation of cover from the insurer in writing, or check their renewal offer to see what the payment terms are on the schedule.
Insurance Brokers often have longer credit terms with Insurers, and therefore payment terms operate differently when compared with the direct market.
Coming to an insurance agreement
If an owner does not want to take out cover with the other owners, they need to be adequately insured one way or another, and generally speaking you cannot have dual insurance on a property. Essentially, the owners need to come to some type of agreement on what the best policy/coverage options are, together with the premium payable, and within WA legislation.
- Strata Insurance
If the current insurer’s premium is more expensive than alternative quotes provided by the other owner, it may be prudent to try a number of things:
- Ask for a discount – The owners can try going back to the current insurer and asking for a discount to compete with the alternative insurer(s).
- Compare the policies – It is very important to make sure the owners review the existing policy and compare the current insurer’s terms with the alternative quote(s). If there is a difference in price, the owners should make sure that the insurance coverage is “like for like”, and that there are no major differences in cover. This can often become confusing, and it can sometimes be worth consulting a specialist Strata insurance broker to assist in the comparison process.
- Can the properties be covered separately?
We suggest the owners check the Act in WA (Strata Titles Act 1985) to determine if they all need to insure together. If the Act notes that they can insure separately, and a Strata policy is not maintained, the owners will need to determine if there are any common areas noted on the Owners Corporation/Strata plan. If there are, they will still generally need to take out a Common Ground Liability Insurance policy to cover the common areas for public liability risks.
This post appears in Strata News #163
This information is not intended to be personal advice and you should not rely on it as a substitute for any form of personal advice. Please contact Whitbread Associates Pty Ltd ABN 69 005 490 228 Licence Number: 229092 trading as Whitbread Insurance Brokers for further information or refer to our website.