This article discusses how shared basements and structural links can limit mixed-use building insurance options in strata complexes.
Question: Is our broker correct in saying that only one insurer will cover our building because we share a basement with a commercial property?
For several years, our broker has told us that Chubb is the only insurer in Australia willing to cover our building because we share a basement with the commercial building next door. How is this the case when mixed-use buildings are common across Australia and often include commercial premises on the ground floor?
We do share a basement with the building next door and are working on a shared facilities register to identify areas of responsibility clearly. When we asked the broker to explain the supposed “complexities”, we received various statements from different insurers, such as:
- the risk falls outside underwriting guidelines due to claims history
- concerns about claims history, structural dependence and outstanding defects
- issues relating to shared infrastructure between our unit plan and the commercial building
Is it reasonable to accept that only one insurer nationwide is willing to offer cover?
Answer: Insurers are more likely to offer cover if they insure the entire complex.
Insuring shared building areas of this nature in strata buildings poses a unique challenge. Many insurers are hesitant to provide cover for these properties due to the complexity of determining financial responsibility in the event of a claim, especially when the same structure is insured by separate companies. However, insurers are more likely to offer cover if they insure the entire complex, thus avoiding these complications.
A practical solution to attract more insurers could be to align the insurance renewal dates with the adjoining building. This approach allows insurers to obtain a quote for both properties at the same time, enabling them to insure the same building (on two policies) and include a condition that they must insure both buildings for the cover to be enacted.
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 Strata News #770.
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Read next:
- NAT: Strata Insurance Commission in Australia: Is transparency enough?
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- ACT: Q&A Strata Insurance Outlined in UTMA 2011
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