NAT: Q&A Liability for water damage between strata lots

This article is about insurance claims and liability for water damage between strata lots.

Question: Due to rising premiums and higher excesses, should strata committees advise owners to use their personal contents insurance liability coverage if they cause damage to other lots?

Given the significant rise in strata premiums leading many owners corporations to adopt much higher excesses, should strata committees advise owners to utilise the legal liability coverage within their personal contents insurance policies when owners are responsible for damage (such as water damage) to another person’s property? This would allow the affected party to be compensated.

Answer: Understanding key points in this context is crucial.

Legal liability coverage comes into play when an owner is deemed responsible for causing damage to another person’s property. It is crucial to understand key points in this context:

• Damage contained within the owner’s lot: If the damage is confined to the owner’s lot, a legal liability claim is not viable since one cannot pursue legal action against oneself for damages.
• Nature of water leaks: Insurance companies often classify water leaks as unforeseen incidents, especially when the lot owner had no prior knowledge of the leak’s potential or cause. In many cases, these leaks are attributed to unforeseen causes without any negligence on the part of the lot owner. Insurers may argue there was no foreseeable action the owner could have taken to mitigate the loss more effectively. Consequently, they may deny liability by asserting that the owner’s actions (or lack thereof) do not constitute negligence under common law principles.
• Lot owner as an insured party: Importantly, a lot owner is an insured party under the strata insurance policy, which grants them the right to make a claim. This aspect underscores the potential for seeking to claim through the strata insurance policy, rather than personal contents insurance, especially when it is challenging to meet the criteria for establishing a claim for legal liability under contents insurance.

This reality suggests that, in many cases, turning to personal contents insurance for coverage under legal liability may not be an option.

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 March 2025 edition of The NSW Strata Magazine.

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Read next:

• NAT: Q&A Public Liability Insurance in Australia
• NAT: What are the dangers of underinsuring a strata building?
• NAT: Q&A Yearly Increases To Strata Insurance

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