QLD: What does Strata Insurance cover? What do we need to disclose?

The LookUpStrata Team

4 years ago

This article and Q&A alerts Qld lot owners to what is covered by strata insurance. Are air-conditioning units servicing an individual lot covered by strata insurance and who is responsible when something like faulty fire sprinklers flood a unit?

Table of Content:

QUESTION: An owner caused major damage to their garage. The body corporate insurer paid for repairs, and the owner paid the excess. The claim resulted in a substantial insurance increase at renewal time. Insurance did not recover the costs from the driver because the driver was an owner in the building. Is this correct?

QUESTION: A lot owner carrying out unauthorised renovations experienced a leak. Is the owner responsible for the excess? Will insurance investigate the cause of the leak?

QUESTION: My car got damaged due to a blocked drain caused by debris. Is the body corporate responsible? How do we get our car insurance excess reimbursed?

QUESTION: Water entered the unit and damaged the floating floors, caused by improperly maintained body corporate assets. As floating floors are not covered by strata insurance, do I have any way of recovering my costs?

QUESTION: Our insurance excess has increased substantially. Should we adjust our budget to factor in the increase in excess?

QUESTION: If body corporate owners actively maintain and manage their buildings, should they have access to better priced strata insurance?

QUESTION: If a lot owner does not maintain known issues in their lot and this causes damage to common property, are they liable?

QUESTION: Our QLD apartment floor was damaged due to a water leak in the drainage pipe behind a dishwasher. The complex is 2 years old and we purchased off the plan. If we wish to claim the damage on insurance, is there a time limit for reporting?

QUESTION: Does the body corporate have a duty to disclose defects reports to their broker/insurer when renewing their insurance cover?

QUESTION: My strata unit had internal water damage from a leaking roof following a weather event. I’ve paid for the roof repair but been told the internal damage is my responsibility and I will only be reimbursed up to the amount of the Body Corporate insurer panel builder’s quote. Is this right?

QUESTION: Lack of maintenance to a shower caused damage to a hallway. Is the owner responsible for the repairs to common property? How is the insurance claim handled?

QUESTION: A lot owner reversed their car into common property. The claim for damage was made through the building insurance. Can the Committee pursue the driver for the excess and how?

QUESTION: Can an owner make a claim directly to the body corporate insurer without the body corporate inspect the damage and determine responsibility?

QUESTION: A overflow sewerage pipe caused damage to carpets. Body corporate insurance removed all carpets, but say they are not responsible for the replacement. Is this really a lot owner’s responsibility?

QUESTION: The gardener handyman does not carry any insurance. Is he covered under the Body Corporate insurance?

QUESTION: Who is liable if a fire sprinkler is faulty and it is activated in an apartment causing water damage to a lot owner’s property?

QUESTION: Our Strata insurance covers the building, however, I’m responsible to maintain my exterior walls, windows and doors. If this is the case, can I reduce my contribution to the BC insurance?

QUESTION: We are trying to figure out if the roof on our building is covered under our building insurance policy.

QUESTION: What insurance claims can be made when a pressure value fails, resulting in damage to carpet, gyprock and kitchen cupboards? The pipes service a number of units in a high rise building?

QUESTION: How much do historical claims impact the upcoming year’s strata insurance premium? Is there a ratio?

QUESTION: Is it possible to insure a Retaining wall? I have tried to insure the retaining wall with my home and contents insurance but the insurance company will not commit.

QUESTION: I am a new owner in a strata building. How do I find out what is common property and covered by the body corporate insurance? How about changes to my lot that have been made over time. Is there a record of these and what is covered by the insurer?

QUESTION: The committee is aware of asbestos in the fire doors but do not wish to disclose this to the broker or the insurer. They’ve engaged an insurer directly. What should the Body Corporate Managers do in this scenario in terms of due diligence and compliance?

QUESTION: I own an investment unit in a strata building and I have landlord insurance. What is covered under my landlord insurance and what is covered under my strata insurance?

QUESTION: Are the compressor units on the roof and the header units inside the apartment, together comprising my air conditioning unit, covered under Strata insurance or my personal contents insurance?

ARTICLE: Is Your Air conditioning Unit Covered By Strata Insurance?

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Question: An owner caused major damage to their garage. The body corporate insurer paid for repairs, and the owner paid the excess. The claim resulted in a substantial insurance increase at renewal time. Insurance did not recover the costs from the driver because the driver was an owner in the building. Is this correct?

An owner within our complex of 36 townhouses misjudged their garage door opening and caused significant structural damage to the cost of around $30,000. The body corporate insurer paid for repairs, and the owner paid the excess.

When the policy fell due for renewal, the premium had increased significantly, and insurance advised the body corporate that the increase was partly due to the claim. We asked the insurer they didn’t recover costs from the owner’s vehicle insurance. They responded that this would not be possible since the owner caused the damage and was effectively a policyholder for the body corporate insurance policy. Had any other third party caused the damage, they would have pursued the driver’s insurance for cost recovery. Can you please advise if this is correct?

The insurance is held by the body corporate. Is this not a separate legal entity from the owner and their vehicle insurer? Could the body corporate insurer recover the repair costs from the owner’s vehicle insurance?

Answer: As the lot owner contributes towards the premium, they are an insured party under the policy.

Yes. If a non-insured third party impacted the strata property, the insurer would have pursued a recovery action against the at fault party to recover the costs.

In this instance, we believe the insurer was correct in advising that they will not pursue a recovery against a lot owner or their vehicle insurance.

As the lot owner contributes towards the premium, they are an insured party under the policy.

Although the strata insurance is in the name of the body corporate, strata policies include specific definitions of “you” that include lot owners and the interest of members of the body corporate.

Insurers are not allowed to lawfully pursue a recovery against someone they insure for a claim they have already paid.

In that essence, it would be the same if you owned a freestanding home, you impacted your garage door, and your home insurer pursued recovery against you for the damage.

While we understand the concern over additional costs associated with a claim, it’s important to consider the implications when buying a property in a strata development. When you choose to own in a strata, you become part of the collective claims history for the complex, which includes claims that may have no direct connection to you. This is a risk that must be considered when deciding to own a property in a strata development.

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.

This post appears in the August 2023 edition of The QLD Strata Magazine.

Question: A lot owner carrying out unauthorised renovations experienced a leak. Is the owner responsible for the excess? Will insurance investigate the cause of the leak?

Our body corporate has six duplexes / 12 units at ground level. Without approval, one lot owner appears to be renovating the interior of their unit.

The kitchen sink and hot water system have been removed. A leak in an internal wall flooded parts of the unit. The leak may have been due to the renovations.

Is the lot owner responsible for the $5000 excess? Will the insurance company carry out a thorough investigation into the cause of the leak?

Answer: Several factors will determine how the insurer assesses the claim.

Concerning who is responsible for the excess, Queensland legislation states that for claims affecting one lot only, the excess is usually paid for by the lot owner unless the body corporate decides it is unreasonable in all the circumstances for the owner to pay the excess.

Concerning the investigation process, several factors will determine how the insurer assesses the claim. The assessment options are:

Assessor: The insurer may appoint an assessor. However, it is important to note that appointing an assessor is an additional cost to the insurer. Assessors are therefore appointed on a case by case basis. If the insurer does not appoint an assessor, they will review the information and documents provided to them as part of their investigation.

Insurer Appointed Builder: In the absence of appointing an assessor, the insurer can also appoint their own builder to report on the damage and quote to repair.

Desktop Assessment: If the owner submits all of the documentation and information needed (such as reports from builders, photos, quotes etc.), the insurer may also conduct a desktop assessment of the information provided.

If the committee has specific concerns about the claim, they can discuss these concerns with the insurer when they lodge the claim. While the insurer has the right to decide on how they assess the claim, the committee can also ask the insurer to appoint an assessor to investigate any concerns.

Tyrone Shandiman Strata Insurance Solutions E: tshandiman@iaa.net.au P: 1300 554 165

This post appears in the June 2023 edition of The QLD Strata Magazine.

Question: My car got damaged due to a blocked drain caused by debris. Is the body corporate responsible? How do we get our car insurance excess reimbursed?

While my car was parked in a non-reserved space in our apartment complex it got damaged (written off) due to heavy rain overnight. The damage was caused by a drain in front of the car that was blocked by debris.

Is the body corporate liable for the damage to my car? If so, how do I approach the body corporate to get our car insurance excess covered?

Answer: The car owner or their insurers would need to demonstrate the body corporate was negligent or otherwise legally liable in relation to the blockage.

The information provided isn’t sufficient to determine whether the body corporate is liable. Essentially the car owner or their insurers would need to demonstrate the body corporate was negligent or otherwise legally liable in relation to the blockage (i.e. prior knowledge of the blockage or not rectifying a known blockage in a timely manner).

If a demand was made to the body corporate, it can be referred to the insurer of a Legal Liability claim, which is considered on a case-by-case scenario by insurers, solicitors and judges (if the claim ends up in court). Claims are never black and white and legal liability will vary based on the circumstances.

In response to how to approach costs being covered by the body corporate, the car insurer should take into consideration recovery prospects as part of the vehicle claim. The general process is you lodge a claim and pay your excess. Once the settlement is finalised and the total cost of the claim is known, the insurer initiates recovery against the party they view are responsible for the damage. If the insurer deems the body corporate is liable, they would attempt to recover the total cost of the claim from the body corporate. If they are successful in recovering costs, the insurance company will generally reimburse the excess.

Tyrone Shandiman Strata Insurance Solutions E: tshandiman@iaa.net.au P: 1300 554 165

This post appears in the May 2023 edition of The QLD Strata Magazine.

Question: Water entered the unit and damaged the floating floors, caused by improperly maintained body corporate assets. As floating floors are not covered by strata insurance, do I have any way of recovering my costs?

During the February 2022 Brisbane floods, water entered my first-floor lot. It ruined the bamboo floor and caused the paint to bubble and peel on my interior walls.

The apparent cause was improperly sealed exterior roof flashing resulting in inundation in the double brick cavity and subsequent water penetration to my unit through the brick and concrete walls.

The building insurers won’t cover the damage as floating floors are explicitly exempt from the policy.

As the damage to my unit was caused by improperly maintained body corporate assets, do I have a case for recovering my costs via QCAT or another avenue?

Answer: There needs to be strong and clear evidence that the damage was caused by a failure of the body corporate to maintain an item it is responsible for.

This has been a very common issue over the last 12 months. I suspect it will continue to be an issue as insurers are still wading through the insurance claims from the floods last year.

There is absolutely an avenue here for the lot owner. However, there needs to be strong and clear evidence that the damage was caused by a failure of the body corporate to maintain an item it is responsible for – to the correct standard. This is where claims often fall over.

It may also be worthwhile to assess:

If the body corporate had an obligation to ensure the insurance coverage included the floating floors; and

If the insurance policy does actually properly exclude the floating floors.

Todd Garsden Mahoneys E: tgarsden@mahoneys.com.au P: 07 3007 3753

This post appears in the May 2023 edition of The QLD Strata Magazine.

Question: Our insurance excess has increased substantially. Should we adjust our budget to factor in the increase in excess?

Our scheme has been hit this year with an increase in the water damage excess from $1000 to $10,000 for each and every claim. Does this seem reasonable?

If the $10,000 excess is defensible and presumably based on a poor history of claims for water damage, should the committee start factoring in extra payments for water damage repairs in our annual budget?

Answer: The body corporate should pass the excess on to the person responsible rather than budgeting to pay for it.

Yes, the increase in water damage excess is probably going to be reasonable, particularly if the insurance had a lot of previous claims on that policy. We’ve had a couple of disputes in the last few months where there is a high excess, and it’s unfortunate, but that’s the reality. There’s nothing really anyone can do about it.

I don’t think the body corporate should be budgeting for hire excesses. Typically, if there is a water claim excess and it’s due to something that happened in a lot, the body corporate should pass that excess on to the person responsible rather than budget to pay for it.

Todd Garsden Mahoneys E: tgarsden@mahoneys.com.au P: 07 3007 3753

This post appears in Strata News #643.

Question: If body corporate owners actively maintain and manage their buildings, should they have access to better priced strata insurance?

Answer: Body corporate owners who actively maintain and manage their building benefit from not having adverse conditions imposed on their insurance policy.

Insurers typically do not provide discounts for buildings that demonstrate maintenance or risk management. It is implied by insurers that this is an expectation.

Instead, insurers impose higher premiums, excesses or policy conditions on buildings with a poor claims history or that disclose issues and defects.

Body corporates that actively maintain and manage their building benefit from not having adverse conditions imposed on their insurance policy.

Therefore, to ensure penalties are not imposed by insurers, buildings should always take a proactive approach to maintenance and risk management.

Tyrone Shandiman Strata Insurance Solutions E: tshandiman@iaa.net.au P: 1300 554 165

This post appears in the April 2023 edition of The QLD Strata Magazine.

Question: If a lot owner does not maintain known issues in their lot and this causes damage to common property, are they liable?

A lot owner in our building (BFP) is aware they have water traps on their lot. They have leaky covers on rooftop access doors, plus a leaky and poorly constructed pergola on their exclusive use rooftop terrace. These items are not maintained or repaired so that they work properly to prevent water damage. The resultant water damage becomes the cost of all owners to fix. Can the owner be pursued for the cost of the resultant repairs?

Answer: Not only can lot owners face an uninsured loss for damage to their own property, they can also be held liable for damage to other’s property as well.

Lot owners have a responsibility to maintain their lot in good condition. That is a requirement under applicable regulations, for example, section 211(3) of Body Corporate and Community Management (Standard Module) Regulation.

From an insurance perspective, failure to maintain a property can also have an adverse impact on insurability.

Insurers will include exclusions such as Damage caused by non-rectification of an Insured Property defect, error or omission that You were aware of, or should reasonably have been aware of – this will give the insurer the ability to deny a claim for damage resulting from the failure to address these known issues.

Not only can lot owners face an uninsured loss for damage to their own property, they can also be held liable for damage to other’s property as well.

Tyrone Shandiman Strata Insurance Solutions E: tshandiman@iaa.net.au P: 1300 554 165

This post appears in the March 2023 edition of The QLD Strata Magazine.

Question: Our QLD apartment floor was damaged due to a water leak in the drainage pipe behind a dishwasher. The complex is 2 years old and we purchased off the plan. If we wish to claim the damage on insurance, is there a time limit for reporting?

Answer: I would recommend the claim for defective drainage be lodged with the Builder or QBCC as soon as practical.

As the property is only 2 years old, it would still be covered by the Builder and Home Warranty Insurance through QBCC.

I would recommend the claim for defective drainage be lodged with the Builder or QBCC as soon as practical. Please refer to the QBCC website for additional details: Home warranty for defective work claims

If you are looking to claim the flooring damage on strata insurance, a claim should be lodged as soon as the damage is noticed. If the leak is not attended to and allowed to continue causing damage to the property, the strata insurer may decline the claim or limit their liability.

Strata insurance will not cover the cost to rectify the defective drainage pipe.

Tyrone Shandiman Strata Insurance Solutions E: tshandiman@iaa.net.au P: 1300 554 165

This post appears in Strata News #628.

Question: Does the body corporate have a duty to disclose defects reports to their broker/insurer when renewing their insurance cover?

If an owner pays for building investigations following a defects inspection, should the initial Defects Report and any subsequent Reports be made available to the quantity surveyor commissioned to prepare the next Sinking Fund Forecast?

Does the body corporate have a duty to disclose these reports, and the identified risks, to their broker/insurer when renewing their insurance cover?

Answer: If asked why you didn’t disclose, how do you justify that?

I think if it affects common property, it is a body corporate expense and I don’t see why it would not be provided to a QS. As to insurance, disclosure is always better, because if asked why you didn’t disclose, how do you justify / explain that?

Frank Higginson Hynes Legal E: frank.higginson@hyneslegal.com.au P: 07 3193 0500

This post appears in Strata News #628.

Question: My strata unit had internal water damage from a leaking roof following a weather event. I’ve paid for the roof repair but been told the internal damage is my responsibility and I will only be reimbursed up to the amount of the Body Corporate insurer panel builder’s quote. Is this right?

My strata title unit, along with several others in the complex, had internal water damage from leaking roofs following a weather event. I have paid to have the roof repaired. The Body Corporate Insurer panel builder quoted about 8 months ago on the cost to repair the internal damage. I have now been advised by the BC insurer that I will have to pay and organise to have the internal repairs completed myself and they will only reimburse me up to the amount as per the panel builder’s quote. They are now imposing a limit on liability.

Despite my request, they have not provided a copy of their report/quote, plus the cost of any repairs will have increased since their quote. Where do we stand?

Answer: Some insurers are offering a cash settlement for claims and in some instances, this can be a benefit to clients, in other instances is it may not be beneficial to accept a cash settlement.

Insurer panel builders are experiencing significant delays following the Queensland and New South Wales storm/flooding event in 2022 which resulted in $5.2 Billion in insurance claims, with over 233,000 claims lodged. This event was a catastrophe for many people and businesses and is the second most expensive weather event in Australia’s history. The number one event was the Sydney Hailstorm in April 1999.

Issues with supply lines for construction materials has also exacerbated the delays for the construction industry.

In catastrophic events, insurers have limitations on the level of control they have over timeframes for contractors completing work for policy holders.

For this reason, some insurers are offering a cash settlement for claims and in some instances, this can be a benefit to clients, in other instances is it may not be beneficial to accept a cash settlement.

The main benefit in accepting such an offer is you may get the work completed much faster by sourcing a local builder that has availability to start works immediately.

Insurance repairs generally cost more than what you may get privately through a builder as insurers builders include project management costs and other contingencies. If, however, you are not able to find a quote lower than the limit of liability offered by the insurer, particularly given the quote is out of date and does not factor in increases to building costs, you should not accept the settlement offer by the insurer. In such instances, we recommend you request the insurer increase the settlement to factor in the higher cost or if not find a builder to quote and repair the work.

It is important to also understand the insurer does not warrant the repairs of builders they do not engage – any issues with workmanship will be a matter between you and the builder that the insurer does not become involved in. If the repairs required for your claim are complex or have a higher risk of workmanship issues down the track and you want the insurers guarantee of workmanship, you can decline the offer and ask the insurer’s repairer to conduct work.

If however, you are happy to engage your own builder, I would recommend first getting quotes from a builder to see if the settlement offer is fair and reasonable. If the quotes are above the insurers limit of liability, you should decline the settlement and ask the insurer to increase their settlement offer to the costs quoted or request they find an alternate repairer to complete the works.

You also have the right to ask for the quotes and reports associated with your claim and we recommend you refer the insurer to their obligations under the General Insurance Code of Practice which states:

Section 79 If we offer a cash settlement under a home building policy, we will provide you with information to help you understand how they work and how decisions are made on cash settlements.

Section 161 At your request, and subject to paragraph 163, we must give you — free of charge, access to any information that we relied on in assessing your application for insurance cover, or in handling your claim, or in responding to your Complaint. We must give you this information within 30 Calendar Days unless paragraph 82 or 151 applies.

If you are not happy with your claim, you can ask the claim is referred to dispute resolution – more information on this process can be found via our recent Dispute Resolution Webinar link. Likewise, if your policy is managed by an insurance broker, you can discuss your concerns with them and they should be able to provide advice on how to navigate your concerns and any disputes that arise from the claim.

Tyrone Shandiman Strata Insurance Solutions E: tshandiman@iaa.net.au P: 1300 554 165

This post appears in Strata News #620.

Question: Lack of maintenance to a shower caused damaged to a hallway. Is the owner responsible for the repairs to common property? How is the insurance claim handled?

An owner of a unit ignored obvious grout issues in their shower. The shower is on the same wall as the hallway and the skirting in the hallway began to rot and crumble. 3 months ago, the cause of the leak and damage was established as the unsealed shower but the owner still hasn’t carried out any repairs. The skirting damage continues to spread.

After watching this webinar with Tyrone Shandiman I have a few questions: Water Damage Insurance Claims.

Does the body corporate send the bill for the resulting repairs to the common property to the owner? Is it up to the owner to decide if they want to lodge a claim under the building insurance?

Answer: There are 2 options available to the body corporate.

If the body corporate believes the owner is responsible for the damage and does not want to cover costs associated with the owners failure to fix the known issues, there are 2 options available to the body corporate:

Letter of Demand to Owner: If due to the owners failure to maintain their property in good condition, common property has been damaged, the body corporate can send a letter of demand to the owner. The owner will then have the option to lodge a public liability claim on their contents insurance or a strata insurance claim.

Lodge a claim on strata insurance – it should be noted that:
1. The insurer may apply exclusions associated with failure to rectify know building defects, errors or omissions – likewise damage must be from a “sudden and accidental” event.
2. The owner should be liable for the excess.
3. The leak would be required to be fixed (with evidence such as a repair invoice confirming this) before the insurer considers cover for the consequential damage.

Tyrone Shandiman Strata Insurance Solutions E: tshandiman@iaa.net.au P: 1300 554 165

This post appears in the October 2022 edition of The QLD Strata Magazine.

Question: A lot owner reversed their car into common property. The claim for damage was made through the building insurance. Can the Committee pursue the driver for the excess and how?

In 6 industrial units under the Standard Module, each unit has 2 exclusive use car parks. Lot 3 reversed into the front of the building on Lot 42, which is common property. The committee wanted to use the building insurance for the repairs. The driver, who was at fault, wanted to use their vehicle insurance. The Committee proceeded to process the claim through their building insurance and now the job is complete. The Committee has asked the driver to pay the small excess, but the driver has refused. Can the committee pursue the amount and if so, how?

Answer: Follow the insurer up and confirm the recovery process is underway.

There are a couple of considerations for this issue.

The Body Corporate and Community Management (Standard Module) Regulation 2020 gives guidance on who is liable for an excess for claims that involve lots, but it does not provide guidance on claims that only involve common property – presumably that is because the body corporate is liable.

If an owner wants to lodge a claim on motor insurance (for example because there is a lower excess), this can be facilitated by the body corporate getting the repairs done (or a quote for the repairs) and submitting a letter of demand to the owner to lodge on their motor insurance.

A letter of demand should include:

Opening statement that you are making a demand (i.e. We would like to submit a letter of demand in relation to a recent incident. If you have insurance the we recommend this letter is sent to your insurer to lodge a claim under the public liability section of your insurance policy.)

Circumstances of the event (include date & description of damage);

Why you believe the driver is responsible;

Summary of costs and a request for reimbursement (include invoices or quotes for repairs with your demand);

Bank details for reimbursement.

As the claim has already been lodged (and possibly settled), the strata insurer is likely to submit their own letter of demand to the driver and in the event they successfully recover all costs, the body corporate will be refunded the excess.

It is therefore our recommendation in this instance the body corporate follow the insurer up and confirm the recovery process is underway. Not only with they recover the body corporate excess but also costs associated with the claim.

Tyrone Shandiman Strata Insurance Solutions E: tshandiman@iaa.net.au P: 1300 554 165

This post appears in the September 2022 edition of The QLD Strata Magazine.

Question: Can an owner make a claim directly to the body corporate insurer without the body corporate inspect the damage and determine responsibility?

Can an owner make a claim directly to the body corporate insurer without the body corporate having inspected the damage?

An owner has spoken with the insurance company and is getting quotes for damage to tiles and ceiling due to water ingress. However, the committee has not had the opportunity to inspect the damage and determine responsibility.

The proposed damage is from water damage more than ten years ago and is being raised now with a current insurance claim the committee has with the insurance company due to a recent rain event. In total. three units are impacted by the current claim including the owner mentioned above.

Answer: If the committee have concerns about the damage being claimed, they can make representations to the insurer about their concerns.

Some insurers will allow owners to lodge claims on strata policies as lot owners have an insurable interest in the policy, which affords them the opportunity to make a claim.

Notwithstanding, if the committee have concerns about the damage being claimed, they can make representations to the insurer about their concerns and asking that an assessor is appointed to the claim to assess the damage claimed.

It is unusual for a committee to inspect a unit. Usually, the owner provides evidence of damage or insurers will appoint an assessor to do the inspection.

In cases where three units are damaged, the damage should all be submitted to the one claim so the body corporate should ask that the other units are added to the claim so that one excess applies.

Tyrone Shandiman Strata Insurance Solutions E: tshandiman@iaa.net.au P: 1300 554 165

This post appears in Strata News #593.

Question: An overflow sewerage pipe caused damage to carpets. Body corporate insurance removed all carpets, but say they are not responsible for the replacement. Is this really a lot owner’s responsibility?

A sewerage pipe blocked and caused backflow into my apartment and the apartment next door.

Insurance for body corp removed all carpet and underlay from both units and we are now left with bare concrete.

The body corporate’s insurance company states they are not liable to replace any of the carpet. Are they required to at least replace the damaged carpet or is this really a lot owner responsibility?

Answer: Carpet is deemed to be temporary flooring and is therefore the owner’s responsibility to insure under contents insurance.

In this instance there should be a claim on strata insurance (for building damage) and contents/landlords insurance (for damage not considered building).

Carpet is deemed to be temporary flooring and is therefore the owner’s responsibility to insure under contents insurance.

If the owner has a contents insurance policy, they should make a claim under that policy. If not, they will be responsible for the repairs for damage to the carpet.

Tyrone Shandiman Strata Insurance Solutions E: tshandiman@iaa.net.au P: 1300 554 165

This post appears in the July 2022 edition of The QLD Strata Magazine.

Question: The gardener handyman does not carry any insurance. Is he covered under the Body Corporate insurance?

Answer: We recommend the body corporate engage contractors who carry appropriate insurance.

The strata policy extends to cover the body corporate for legal liability claims made for personal injury and property damage.

While this can extend to cover liability the body corporate are drawn into as a result of the gardener’s action, it does not cover claims or legal actions made against the gardener.

In this instance, the gardener would need to carry public liability insurance.

While there is nothing specifically requiring the gardener to have liability insurance in Body Corporate Management Act, the Body Corporate should consider:

If someone was seriously injured as a result of the gardener and was not able to pursue their insurance they could be left in a problematic circumstance without the proper ability to recover financial losses from the gardener;

Solicitors for an injured party will more actively pursue defendants who can pay a claim (i.e. insured defendants) vs those who cannot. If there was an injury where the body corporate & gardener were drawn into the claim and the gardener was not insured, a solicitor may pursue the body corporate more actively having an adverse impact on the body corporate claims history.

For the reasons stated above, we recommend the body corporate engage contractors who carry appropriate insurance.

Tyrone Shandiman Strata Insurance Solutions E: tshandiman@iaa.net.au P: 1300 554 165

This post appears in the June 2022 edition of The QLD Strata Magazine.

Question: Who is liable if a fire sprinkler is faulty and it is activated in an apartment causing water damage to a lot owner’s property?

Answer: Ultimately, the party liable for the damage caused to the lot is the party that is responsible for the maintenance of the faulty sprinkler.

Todd Garsden, Mahoneys:

Ultimately, the party liable for the damage caused to the lot is the party that is responsible for the maintenance of the faulty sprinkler. If any related party has an insurance policy to reduce that liability, then that is a benefit. All utility infrastructure that forms part of scheme land is, by default, common property (and the maintenance obligation of the body corporate) unless it solely relates to supplying services to the lot and is within the boundaries of the lot.

Adjudicators have held that fire related infrastructure which only relates to one lot can actually service the entire scheme if it links back to a building wide notification system – making the body corporate responsible for its maintenance.

Accordingly, it is important to ascertain what part of the sprinkler system was faulty. Is it:

a part that only services the lot (in which case the lot owner would be responsible); or

a part that connects back to a building wide system (in which case the body corporate would be responsible).

Tyrone Shandiman, Strata Insurance Solutions:

In this instance, it is recommended an insurance claim is made on both the strata policy and the lot owner’s contents or landlords insurance.

From a strata insurance perspective, insurers cover the cost to repair water damage to insured property but generally exclude repairs costs related to finding and fixing the leak, as it is generally considered a maintenance responsibility failure by the owner or body corporate and such repairs relate to general maintenance, defects or wear and tear.

As the strata insurance policy does not cover damage to contents items including carpets, curtains/blinds, appliances and other contents items, we recommend a claim is made on the lot owners’ landlords or contents insurance.

If the insurer believes the body corporate is responsible for the damage, they can take recovery action against the body corporate and in such instances, the contents insurer may repay the excess subject to the policy terms and conditions.

In such instances where a claim is made against the body corporate for legal liability for damage to lot owner’s contents a claim can be made on the Legal Liability or Public Liability section of the strata policy.

Todd Garsden Mahoneys E: tgarsden@mahoneys.com.au P: 07 3007 3753

Tyrone Shandiman Strata Insurance Solutions E: tshandiman@iaa.net.au P: 07 3899 5129

This post appears in the April 2021 edition of The QLD Strata Magazine.

Question: Our Strata insurance covers the building, however I’m responsible to maintain my exterior walls, windows and doors. If this is the case, can I reduce my contribution to the BC insurance?

I live in a townhouse complex that is a Standard Format Plan. As part of my levies, I pay an annual insurance levy which is supposed to cover the building, including external windows and doors. However under a Standard Format Plan, I am the one responsible for the maintenance of both the inside and outside of the building, including exterior walls, windows, doors and even foundations.

Does this mean that if my unit building is damaged or destroyed, I am liable for its reconstruction, not the body corporate? If this is the case, can I get a reduction of the Body corporate insurance by only paying for common property cover and then pay my own home (and contents) insurance?

Answer: It is important to understand the difference between “responsibility to insure” and “responsibility to maintain”.

In this instance, it is important to understand the difference between “responsibility to insure” and “responsibility to maintain”. This is a common area of misunderstanding in strata.

For strata buildings, the body corporate can be responsible for insuring property that a lot owner is responsible to maintain.

If that property is damaged, then the first consideration is insurance (which is maintained by the body corporate).

If the damage is not claimable (for example the claim is below excess or excluded under the policy) the lot owner then becomes responsible for the cost of that maintenance.

Tyrone Shandiman Strata Insurance Solutions E: tshandiman@iaa.net.au P: 07 3899 5129

This post appears in Strata News #544.

Question: We are trying to figure out if the roof on our building is covered under our building insurance policy.

I am trying to confirm if the “roof” of a strata building is included as part of our Insurance policy which states the definition of “Insured Property” as:

Building: Building means building or buildings as defined by the Strata Schemes Management Act, Strata Titles Act, Community Titles Act or similar legislation applying where Your Building is situated.

Can you confirming if “roof” is defined as being part of a building?

Answer: The roof, being a permanent fixture, is covered by strata insurance.

There are two questions that need to be considered when dealing with roof damage.

Is the roof covered?

The roof, being a permanent fixture, is covered by strata insurance.

The basic principle is that if you pick the unit up and shake it anything that falls out is lot owners contents + temporary flooring such as carpet, blinds & curtains, appliances that are not permanently attached, aircon units servicing an individual lot (QLD only). Other permanent fixtures including but not limited to the roof are covered by strata insurance subject to the policy terms, conditions & exclusions.

Is the event/damage covered?

It is also important to consider whether the event itself is covered.

Often, claims related to roof repairs are maintenance issues and the two barriers to cover are:

The insuring clause – the policy provides cover for “sudden and accidental damage”; and

Exclusions – Common exclusions for roofing claims are wear & tear or gradual deterioration exclusion.

Damage to roofs by sudden events such as storm, hail & severe wind can be considered.

Tyrone Shandiman Strata Insurance Solutions E: tshandiman@iaa.net.au P: 07 3899 5129

This post appears in the December 2021 edition of The QLD Strata Magazine.

Question: What insurance claims can be made when a pressure value fails resulting in damage to carpet, gyprock and kitchen cupboards? The pipes service a number of units in a high rise building?

In The NSW Strata Magazine | September 2021, Tyrone Shandiman stated that “Where there is damage to both buildings & contents, a claim MUST (my emphasis) be made on both the contents and the strata policy”. I note his answer was to a question related to a burst pipe from a washing machine. Would the answer be different were there damage to carpet, furniture, gyprock and kitchen cupboards caused by a pressure valve failure (after some 30 years) in pipes that service a number of units in a high rise building ie the pipes and valve are common property?

Is the position the same In Qld?

Answer: The basic principal is that you must claim on the policy that insures the property damaged.

The basic principal is that you must claim on the policy that insures the property damaged. In this case, damage to carpet and furniture would be contents insurance and damage to gyprock and kitchen cupboards would be strata insurance.

With regard to cover subject to assessment by the insurer and applying the policy terms and conditions, the policy holder could expect that the insurer would cover water (“sudden & accidental damage”) but exclude repair costs associated with finding and fixing the damaged pressure valve (“wear & tear”).

The treatment of claims is consistent across all states in Australia.

Tyrone Shandiman Strata Insurance Solutions E: tshandiman@iaa.net.au P: 07 3899 5129

This post appears in Strata News #512.

Question: How much do historical claims impact the upcoming year’s strata insurance premium? Is there a ratio?

Answer: Claims history does impact the insurance premium.

Claims history is a major rating factor considered by insurers and therefore it does impact the insurance premium. Guidelines around claims history will differ from insurer to insurer.

In our discussions with insurers, we are advised they are targeting clients with “running losses” for everyday claims such as water damage, glass & impact damage claims of less than 30% of the insurers base premium (excluding GST, Stamp Duty, Fees).

In addition to paying for claims associated with “running losses” the remaining premium is used by the insurer to cover operating costs (such as wages, rent etc) and re-insurance which insurers purchase on global insurance markets to cover low frequency/high cost claims that might happen say every 25, 50 or 100 years including one off large losses (claims over say $500,000) & catastrophe events (such as storm’s, earthquake, tsunami etc). When “running losses” exceed 30%, due to operating & re-insurance costs the insurer must provision for, a policy starts to run at a loss for the insurer.

Insurers are also looking at the type of claim – for example, water damage claims are less favourable for some insurers. A series of water damage claims can be a lead indicator that pipes, membranes, roofs and other water apparatus are starting to fail due to either coming to the end of their use life or they were not installed correctly when the property was built.

To avoid your claims history impacting your insurance premiums, it is recommended that regular preventative maintenance is conducted.

Tyrone Shandiman Strata Insurance Solutions E: tshandiman@iaa.net.au P: 07 3899 5129

This post appears in the August 2021 edition of The QLD Strata Magazine.

Question: Is it possible to insure a Retaining wall? I have tried to insure the retaining wall with my home and contents insurance but the insurance company will not commit.

Is it possible to insure a Retaining wall? We have just spent $180,000 replacing a retaining wall on our complex of 10 strata units, amounting to $18,000 from each unit. Now we have an issue with a retaining wall on the opposite side and the chairperson is saying “it is on your land you pay for it”. I cannot work out why one side is different to the other. All walled areas in our scheme are on common property with exclusive rights.

I have tried to insure the retaining wall with my home and contents insurance but the insurance company will not commit. Retaining walls seem to be a very grey area and no one wants to commit.

Answer: You cannot insure items defined as “building” under a policy other than the strata policy, due to the basic principal that you can’t insure part of a building.

I think it is important to understand the difference between “responsibility to insure” and “responsibility to maintain” the retaining wall. It is my view this is where the misunderstanding may be.

As the retaining wall is a permanent fixture, a strata policy defines the retaining wall as “building” under the strata insurance policy. As you cannot insure items defined as “building” under a policy other than the strata policy, due to the basic principal that you can’t insure part of a building, The Body Corporate Management Act requires the body corporate to insure permanent fixtures including those inside a lot under the strata insurance policy. It is an accepted practice in strata that the body corporate has responsibility to insure permanent fixtures.

For events that fall outside of an insurance claim, a lot owner has responsibility to maintain property that forms part of their lot. In the case of a retaining wall, strata policies will cover sudden and accidental damage that can be the first barrier to making a claim. Furthermore, exclusions can apply including storm or rainwater to retaining walls, gradual deterioration, gradually operating causes, earth movement, erosion, invasion of tree or plant roots, normal settling, creeping, heaving, seepage, shrinkage, or expansion in buildings, foundations, footings and other structural improvements.

Outside of maintenance matters that are not covered by insurance, it falls to the owner of the property to maintain that property. With regard to whether the retaining wall forms part of common property and is the body corporate responsibility to maintain or whether the retaining wall forms part of the lot and is the lot owners responsibility to maintain, that question fits the professional remit of a strata manager. Notwithstanding, strata plans should provide clarity on this question.

Tyrone Shandiman Strata Insurance Solutions E: tshandiman@iaa.net.au P: 07 3899 5129

This post appears in the July 2021 edition of The QLD Strata Magazine.

Question: I am a new owner in a strata building. How do I find out what is common property and covered by the body corporate insurance? How about changes to my lot that have been made over time. Is there a record of these and what is covered by the insurer?

Answer: The basic principle is that if you pick the unit up and shake it anything that falls out is the lot owners contents

William Marquand:

To check the coverage of your insurance contact your body corporate manager and ask for a copy of the certificate of currency and policy disclosure statement for the insurance for your scheme. If you have a specific question your manager can refer it to the scheme’s insurance broker and they may be able to provide an answer.

Generally, the extent of your insurance coverage will be determined by whether your scheme is a standard format or building format plan. The government website has a detailed explanation of what should be covered and is worth reviewing: Queensland Government: Insurances in a body corporate

As per that website the body corporate must have insurance for:

common property

body corporate assets

public risk

every building which contains a lot.

It is possible that your insurance coverage will be more extensive than that, but you will need to make sure you understand what is and isn’t common property.

The website also provides a definition of what is a building, stating:

A ‘building’ includes any improvements made to the building and fixtures added to the building. It does not include:

temporary wall, floor and ceiling coverings, carpets

fixtures that can be removed by a lessee or tenant at the end of a lease or tenancy

mobile or fixed air conditioning units for a particular lot

curtains, blinds or other internal window coverings

mobile dishwashers, clothes dryers or other electrical or gas appliances that are not wired or plumbed in.

So, in most cases, your contents are not covered.

The question asks how you know about changes to the lot. Ideally, all changes should have been recorded as having been approved by either a committee or general motion and you should be able to check the body corporate records for these. In practice that may not have happened. However, from an insurance perspective the body corporate is responsible for insurance items defined by legislation as “building” (i.e. permanent fixtures) including property inside the boundary of a lot.

Tyrone Shandiman:

The basic principle is that if you pick the unit up and shake it anything that falls out is the lot owners contents + temporary flooring such as carpet, blinds & curtains, appliances that are not permanently attached, aircon units servicing an individual lot (QLD only).

Other permanent fixtures including but not limited to kitchen & bathroom cabinetry are covered by strata insurance subject to the policy terms, conditions & exclusions.

Lot owners should also have contents/landlords insurance to cover property not insured by the strata policy & liability within the lot and I always suggest lot owners add an extra say $10,000 contents cover on what they believe should be covered for any incidental items not considered as it might only cost say $50 for the extra piece of mind.

Renovations that fall within the definition of the insurers policy wording for “building” (i.e. permanent fixtures) will form part of the strata insurance.

Most policies will have a provision for “lot owners fixtures & fittings” which is designed to cover instances where lot owners replace existing or install additional fixtures and fittings in their lot/unit without the Body Corporate being aware of such improvements. As a consequence, the cost of these improvements may not be included when arriving at the building replacement cost, thus increasing the possibility of underinsurance in the event of a major loss. The automatic cover provided by the insurer allows for extra re-build costs in addition to the building sum insured if a lot owner has upgraded their property without the body corporate knowing or factoring this into the building sum insured.

Insurers do not keep a record of alterations lots.

William Marquand Tower Body Corporate E: willmarquand@towerbodycorporate.com.au P: 07 5609 4924

Tyrone Shandiman Strata Insurance Solutions E: tshandiman@iaa.net.au P: 07 3899 5129

This post appears in the June 2021 edition of The QLD Strata Magazine.

Question: The committee is aware of asbestos in the fire doors but do not wish to disclose this to the broker or the insurer. They’ve engaged an insurer directly. What should the Body Corporate Managers do in this scenario in terms of due diligence and compliance?

Answer: Does the insurer ask about whether there’s any asbestos in the building?

Firstly, does the insurer ask about whether there’s any asbestos in the building? So obviously, if they do, there’s a definite requirement to answer correctly on that. The other thing that you need to look at with asbestos is that I know there are policies in the market that have exclusions around asbestos. The third thing is, do you have a duty to disclose this information as a matter that’s relevant to the insurer’s decision to ensure you? If that’s questionable, I probably would suggest that you err on the side of caution.

From the Body Corporate Managers perspective, I would probably say to the committee ‘Look, this could be a matter that you need to disclose to the insurer. Your failure to do that could mean the insurer voids the policy at the time of a claim’, and I guess put it back on the body corporate that they should consider this in not disclosing.

If you’ve done that as a Body Corporate Manager, you’ve really fulfilled your duty to the client. The better thing to do would be just to refer it to the broker and have them deal with that issue and forward the advice from the broker to the committee.

Tyrone Shandiman Strata Insurance Solutions E: tshandiman@iaa.net.au P: 07 3899 5129

This post appears in the May 2021 edition of The QLD Strata Magazine.

Question: I own an investment unit in a strata building and I have landlord insurance. What is covered under my landlord insurance and what is covered under my strata insurance?

Answer: If you were to pick the unit up and shake it, anything that falls out is lot owner’s contents

The basic principle is that if you were to pick the unit up and shake it, anything that falls out is lot owner’s contents + temporary flooring such as carpet, blinds & curtains, appliances that are not permanently attached and aircon units servicing an individual lot (QLD only).

Other permanent fixtures including but not limited to kitchen & bathroom cabinetry are covered by strata insurance.

Tyrone Shandiman Strata Insurance Solutions E: tshandiman@iaa.net.au P: 07 3899 5129

This post appears in the April 2021 edition of The QLD Strata Magazine.

Question: Are the compressor units on the roof and the header units inside the apartment, together comprising my air conditioning unit, covered under Strata insurance or my personal contents insurance?

Our 75 apartment complex has Strata Insurance which mentions cover for motors burnt out by Fusion. I also have contents insurance. Are the compressor units on the roof and the header units inside the apartment, together comprising my air conditioning unit, covered under Strata insurance or my personal contents insurance?

Answer: In Queensland, Airconditioning units that service an individual lot are the lot owners responsibility.

In Queensland, Airconditioning units that service an individual lot are the lot owners responsibility to insure under contents insurance.

So if you have a contents insurer you should make contact with them first. They may need a decline letter from your strata insurer before a claim can be considered.

Tyrone Shandiman Strata Insurance Solutions E: tshandiman@iaa.net.au P: 07 3899 5129

This post appears in the April 2021 edition of The QLD Strata Magazine.

In Queensland, is Your Air conditioning Unit Covered By Strata Insurance?

Queensland lot owners of strata properties need to be mindful that air-conditioning units, whether fixed or not, are not covered by strata insurance.

The Body Corporate and Community Management (Standard Module) Regulation 2008 implicitly states that Air-conditioning units servicing an individual lot are the not part of the definition of building for insurance purposes:

.. building includes improvements and fixtures (but not including carpet) forming part of the building, but does not include —

(c) mobile or fixed air conditioning units servicing a particular lot;

Insurers will generally provide cover in accordance with applicable strata legislation and subsequently, strata insurers will seek to apply an exclusion that reflects the legislation.

Other states in Australia do not have such exclusions in their strata legislation for Airconditioning units and therefore, insurers only seek to exclude Airconditioning units in Queensland in their insurance policy.

It is not unusual for individual states to exclude cover for items a reasonable person might deem to be part of the building, for example in New South Wales and Australian Capital Territory strata legislation excludes cover for paint and wallpaper.

To avoid any gaps in cover we recommend all owners of lots in strata take out contents or landlords insurance which is intended to cover anything that is not covered by strata insurance.

Tyrone Shandiman Strata Insurance Solutions E: tshandiman@iaa.net.au P: 07 3899 5129

This post appears in Strata News #292.

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