Insurance – What’s Covered and Making a Claim
With the recent heavy rainfall and flooding in parts of Queensland, many of us are washed over with memories of the 2011 floods which left thousands of residents with damaged properties, a mammoth clean-up and in dire need of compensation from their insurers. This event stands as a strong reminder of the importance of strata insurance which provides cover specifically pertaining to strata schemes.
It is important to be aware that strata insurance provides cover for common property and the building’s structure. This means that the body corporate is responsible for all common areas and the structural elements of the building. Owners are typically responsible for the internal contents of their unit. If you need to brush up on your strata insurance, we have broken down all there is to know:
Insurance – The Basics
Under the Body Corporate and Community Management Act, the body corporate must insure the common property and the body corporate assets to full replacement value. The insurance policy must cover damage and the costs associated with the reinstatement or replacement of insured buildings. The cover must provide for the reinstatement of the property to its condition when new, this includes demolition costs and professional fees such as surveyors or architects.
Insurance – What Is Covered?
When you own in a body corporate, part of the levies you pay contributes to the insurance policy. Strata insurance will generally cover common or shared property against defined acts. This might include common areas, lifts, pools, car parks, gardens, wiring, balconies, walls, windows, ceilings and floors. Strata insurance must provide liability cover in the event people are injured on common property. A defined act is usually an accidental or malicious event, storm damage or fusion, i.e. motor burn out.
Insurance – What Is Not Covered?
Strata insurance is just like any other form of insurance in that there are restrictions to the policy known as exclusions. Each insurer has different exclusions and policy terms and conditions. It is important you read the policy purchased by your body corporate to understand what is and is not covered in your unit. If you are on the Committee, make sure to understand what is excluded from the policy before selecting cover. The best price may not mean the best policy. Please note that policies are not issued to cover damage resulting from gradual deterioration. Gradual deterioration or wear and tear should be rectified by maintenance.
Does The Body Corporate Insure My Contents?
No. You should make sure you have appropriate contents cover for your belongings and for anything of value that the body corporate insurance does not protect. Strata insurance covers only common or shared property. This may include some of the fixed parts of your unit such as bathroom fixtures, kitchen fixtures and stove top, but will not cover everything. It is important to note that whilst the body corporate insurance may cover these parts of your unit in the event of a defined act, the body corporate is not responsible for the ongoing maintenance of these items. Damage to carpets, floor coverings, removable fixtures and fixed split system air conditioning units within a lot are not recoverable on the body corporate insurance policy. Lot owners should report damage to these items to their contents insurers.
It is important you read the policy purchased by your body corporate to understand what is and is not covered in your unit.
How Can I Claim?
In order to submit a claim, you will need to complete and lodge a claim form including any quotations for the repair or replacement of your lost or damaged property. The claim form in most cases be submitted via the Body Corporate Manager when they have been engaged to manage the Body Corporate insurance, otherwise it must be submitted direct to the broker engaged by the Committee.
The claim is then reviewed for completion of all required details and submitted to the insurer on receipt of the required quotations and/or receipts. If a quotation exceeds $1,000 the body corporate insurer may require a second quote or appoint an assessor.
Who Should Pay the Excess?
For an event effecting only one lot, the lot owner is liable for the excess unless the body corporate decides it is unreasonable in all circumstances for the owner to accept liability. For more details on this topic, please read the previous article contributed by Archers the Strata Professionals here.
This article was contributed by Carly Dudley, Insurance Account Executive at Marsh Advantage Insurance.
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Carly, I am troubled by your advice an owner may make a claim directly on the Body Corporate’s policy. Surely the policy and contract is between the underwriter and Body Corporate and an owner would need the Body Corporate’s sanction to lodge any claim as otherwise the policy would be exposed to potentially frivolous and fraudulent claims.
Good Morning Lynden
Thank you for your question as the relationship between the insurer and the body corporate and who is actually able to make claims is one that we get a lot. You are correct in saying that the insurance policy ‘contract’ is between the insurer and the body corporate. You must remember that the term “body corporate” or as it’s referred to in the Legislation, a Community Titles Scheme, is used to describe the group own owners who own lots within the Community Titles Scheme. So when we talk about the body corporate, we are simply referring to a group of individual owners meaning that each individual owner is a party to the “contract” with the insurer.
In a perfect world each owner should submit any claims through to the broker or agent managing the policy on behalf of the body corporate because they would be able to make the owner aware of any potential issues with the claim before submitting to the insurer.
I have been in the Insurance Industry for 35 years and still get conflicting responses from Insurers as to what owners should insure in regards to contents. Do owners have to insure the bathrooms and kitchens under their contents sum insured to cover in the event of damage or are they clearly covered under the Body Corporate Insurance.
Needs clear clarification.
The above article suggests the Body Corp Insurance does but with limitations??
Hi James
We understand your pain as trying to make sense of an insurers Product Disclosure Statements can be confusing at times. When I started in the Strata Insurance industry I was given some very simply but accurate advice when it comes to knowing what the body corporate insurance covers. The advice was that if you were tip your unit upside down everything that falls is not covered by the body corporate insurance (e.g. your furniture). Whilst it isn’t as simple as this it provides a good guide.
To provide the more detailed response Section 174 of the Body Corporate and Community Management (Accommodation Module) Regulation 2008 requires that the body corporate insures the “building”. The definition of “building” is outlined below. This means that fixed items such as cupboards, internal walls, shower screens, etc are covered under the body corporate’s insurance policy.
building includes improvements and fixtures (but not including carpet) forming part of the building, but does not include—
(a) temporary wall, floor and ceiling coverings; or
(b) fixtures removable by a lessee or tenant at the end of a lease or tenancy; or
(c) mobile or fixed air conditioning units servicing a particular lot; or
(d) curtains, blinds or other internal window coverings; or
(e) mobile dishwashers, clothes dryers or other electrical or gas appliances not wired or plumbed in.
Note that the above is only relevant to lots registered under a Building Format Plan of Subdivision (typically high rise units and most townhouse complexes). Lots registered under a Standard Format Plan that don’t share common walls are an owners responsibility to insurer.
my kitchen was damaged during cyclone debbie; insurer refused to replace the kitchen as it was already old and worn, granted it was old but it was functional, they offered me $1500 as a payout towards a replacement kitchen.
It cost over $20000 to replace.
given that they offered me a payout, would they not be liable for more as they have committed to the fact that the kitchen was damaged to to water penetration through the roof( we are upper unit)
Dear Mr McDonald,
Thank-you for your inquiry.
Without being aware of the specific claim and details pertaining to the settlement offer, I can only advise as to what you are entitled as per the Product Disclosure Statement (PDS), and the insurer’s obligations.
An insurer is obligated to respond to any claimable event as per the PDS, subject to the denoted exclusions and conditions within the PDS. Any damages sustained to your unit (building only) due to the cyclone, the insurer is obligated to meet the costs for rectifying the claimable damage. In saying this, the PDS specifically excludes any damages arising directly or indirectly from:
– Lack of maintenance, rust, corrosion … wear and tear, fading, gradual deterioration, wet or dry rot, or failure to maintain Your insured property in a reasonable state of repair
From the information you have provided, it would appear that your kitchen was displaying evidence of ‘gradual deterioration, wear and tear, and lack of maintenance.’ The insurer appears to have determined the costs to rectify the claimable damage as per their settlement offer. The insurer is not obligated to meet any costs to rectify the maintenance issues – only the damage resultant from the cyclone. The insurer is not obligated to issue any amount above the costs to rectify the resultant cyclone damage.
Unfortunately, in the absence of specific details and the specific claim, I am only able to convey as to how the PDS will respond in regard to evidence of maintenance and claimable damage.
I hope the above information has provided some clarity in response to your inquiry.
Re unit content insurance, my strata manager says water and electrical pipes/ reticulation are body corporate but fittings in-unit are the owners problem. You mention stove top is body corporate, but what about oven in kitchen bench? Also grey area of paint on inside room walls, can be owners cost to replace despite being part of structure as boundary of unit is middle of structural walls not dividing walls between rooms and hallway. More clarification required in these general comments made in article.
Hi Brian
Thanks for your question. The body corporate is responsible for insuring the “building” and the “building” is defined as follows.
building includes improvements and fixtures (but not including carpet) forming part of the building, but does not include—
(a) temporary wall, floor and ceiling coverings; or
(b) fixtures removable by a lessee or tenant at the end of a lease or tenancy; or
(c) mobile or fixed air conditioning units servicing a particular lot; or
(d) curtains, blinds or other internal window coverings; or
(e) mobile dishwashers, clothes dryers or other electrical or gas appliances not wired or plumbed in.
Your strata manager may have been referring to what your responsibility is with respect to maintenance rather than insurance, which are two completely different things. You would definitely be responsible for the maintenance of your fittings inside your unit but if they were damaged by an insurable event then they would fall under the definition of part of the building as stated above. If your over is wired in then that too would be included in the definition of the building as well.
Regarding the paint on inside room walls if an insurable event occurred which meant that your unit needed to be repainted then the body corporate’s insurance would be responsible for this because the wall forms part of the building definition.