Following TC Alfred, the strata industry is bracing for an influx of storm damage/water ingress insurance claims.

Accordingly, it is appropriate for us to draw upon our collective experience dealing with insurance companies and the potential pitfalls with getting insurance works completed following a weather event.

As part of a body corporate claim on its insurance being settled, it is open to the insurance provider to make a cash settlement offer to affected lot owners, essentially leaving those owners to take the cash and then make their own arrangements for repair to their lot.

On the face of it, a cash settlement may appear to be a win, however – once the cash is in hand, the pressure is on owners to set about rectifying the damage caused to their lots as quickly as they can.

So what are the dangers of delay in owners taking their time to have their units fixed after receiving a cash settlement?

Firstly – the body corporate’s insurance provider may refuse to offer insurance if they do not receive evidence each impacted unit was rectified before the insurance is due to be renewed and/or insurance may be offered with an exclusion for particular units not rectified.

Secondly – insurance providers will often, as a qualifying question to offering coverage, ask whether the body corporate has had any claims declined and/or if any other insurance providers have declined to offer coverage – the body corporate is required to confirm where another company has declined to provide coverage and this can further limit the insurance companies who might be willing to offer coverage to the body corporate.

Thirdly – where the owners are unable to secure insurance for their building – this can put individual owners in

breach of the mortgage contract with their bank and make re-financing and even the sale of their unit very

difficult.

But the owners say they don’t have to remediate their lot – they only have to “maintain” it

This argument has not traditionally found favour in the adjudicator’s office and where an owner is refusing to repair their lot and this looks like it is impacting the body corporate’s insurance renewal – it may be worth the body corporate’s time to litigate the issue to compel the owner at fault to remediate their unit.

In this case: https://classic.austlii.edu.au/cgi-bin/sinodisp/au/cases/qld/QBCCMCmr/2023/260.html?stem=0&synonyms=0&query=flood the respondent lot owner argued he did not need to remediate his unit following a cash insurance payout. He argued that since the Council were charging him for rates/water and electricity and were connected to his unit,  that his unit was operational.

The Adjudicator disagreed with the respondent and made orders for the respondent to engage a building contractor and undertake bacterial testing to his unit given the four-year delay in repairs to his unit.

Could the body corporate “project manage” insurance works to lots internally?

Yes – if properly authorised, the body corporate could act as the project manager for the affected lots by handling payment to contractors and supervising works. Its possible contractors might not be willing to take on repairs of an individual lot, but would be interested where there were a handful of lots at the same complex with similar water ingress issues to attend to.

If you have any questions regarding the above, we are happy to assist.