This article discusses strata insurance non disclosure obligations and when non-compliant issues must be reported to an insurer.
Question: Our strata property has non-compliant issues that we haven’t disclosed to our insurer. Our strata manager discouraged us from volunteering information. Is this correct?
Our strata property has non-compliant issues that we haven’t disclosed to our insurer. An owner proposed a motion at a meeting to contact our insurance company and clarify our coverage. During the Extraordinary General Meeting (EGM), the council of owners voted against full disclosure to the insurance company, and our strata manager commented, “The more you volunteer to the insurance company, the more they impose penalty excesses and clauses.” This comment shocked owners, especially considering that the strata company has a ‘Duty to not misrepresent under the Insurance Contracts Act 1984‘.
Could the strata manager’s comments significantly affect owners’ investments, especially given the potential risk of being uninsured in the event of a claim due to non-disclosure? Is this comment from the strata manager appropriate and have they possibly violated their obligations, considering the serious implications and the risk of owners losing their homes?
Answer: Voluntarily disclosing matters that do not legally require disclosure can have unintended consequences.
Whether an issue needs to be disclosed to an insurer depends on its materiality and whether it falls under the duty of disclosure as outlined in the Insurance Contracts Act 1984. It is difficult to determine whether this matter requires disclosure without knowing the full nature of the alleged non-compliance — including any expert reports or formal notices.
While I understand the strata manager comment may have caused concern, it is worth noting that in some circumstances, voluntarily disclosing matters that do not legally require disclosure can have unintended consequences. That said, this must be carefully balanced against the legal obligation not to misrepresent or omit material facts.
In this instance, rather than contacting the insurer directly, it may be more appropriate for the strata corporation to obtain independent advice from a qualified insurance broker who understands strata insurance. A broker can assess the nature of the issue and provide a recommendation on:
- Whether disclosure is legally required;
- What information (if any) should be disclosed;
- How best to approach the insurer to protect the interests of all owners.
Taking this approach ensures the corporation makes an informed decision while meeting its legal obligations and avoiding unnecessary risk.
This post appears in Strata News #743.
Tyrone Shandiman Strata Insurance Solutions E: tshandiman@iaa.net.au P: 1300 554 165
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 Advisenent Australia AFSL No 240549, ABN 15 003 886 687.