This article about insurance claims has been supplied by Jasmin H.Singh & Allison Benson, Kerin Benson Lawyers.
In some situations non-disclosure affects insurance coverage and an insurer may refuse a claim. Failure to disclose to an insurer was one of the key issues in The Owners – Strata Plan No 55682 v W. R. Berkley Insurance (Europe), PLC & Ors [2020] NSWDC 758.
In 2014, a fire broke out in an apartment block in Byron Bay. The Owners Corporation was insured and made a claim on the policy. Unfortunately, the claim was denied on the basis that the Owners Corporation did not comply with its statutory duty of disclosure of informing the underwriting agent that one of the lots was occupied by the Nomads Motorcycle Club and used as the clubhouse for the North Coast Chapter of the club.
The Court found that the Nomads’ occupancy was relevant to the insurer’s decision to accept the risk of providing insurance to the Owners Corporation. As such, the non-disclosure of this fact resulted in the insurer avoiding the policy.
The Court found that although a director of the Owners Corporation’s insurance broker had likely said to an employed underwriter of the underwriting agent that a ‘social club’ and ‘local bike club’ was in occupation, they did not disclose to her that it was the Nomads. The Nomads’ occupation was a matter that was, for the purposes of s 21(1) of the Insurance Contracts Act 1984 (Cth), known by a reasonable person in the circumstances, to be relevant to the decision of the insurer to accept the risk and required disclosure.
If the insurer had been in breach of the contract for insurance, it would have been liable to pay the Owners Corporation the sum of $748,571.41 (being the cost of rebuilding, loss of rent (which was capped on what was recovered by the individual lot owners under the policy), and consequential loss for breach of the policy). As the insurer was not liable, the Owners Corporation would have had to fund the repairs if not for the Court’s finding that the Owners Corporation’s insurance broker had a duty to disclose and by not doing so they were negligent and in breach of the implied term of the retainer to exercise reasonable care and skill, which caused the Owners Corporation’s loss or damage.
Ultimately the broker, its director and the AFS licensee were held jointly liable in damages only in respect of the consequences of the Owners Corporation not having an enforceable policy, amounting to $538,347.41 (being the cost of rebuilding and the capped loss of rent) with the Owners Corporation left to fund the remaining costs.
The lesson for an Owners Corporation to take away from this case is to ensure that it clearly discloses to its insurers, in writing, any matter that may affect the policy, and to keep all correspondence relating to this together with the books and records of the scheme.
Jasmin H.Singh & Allison Benson
Kerin Benson Lawyers
E: allison@kerinbensonlawyers.com.au
P: 02 4032 7990
Please note: This is not intended to be legal advice. You should seek legal advice specific to your situation.
This post appears in Strata News #481.
Have a question about insurance claims or something to add to the article? Leave a comment below.
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This article has been republished with permission from the author and first appeared on the Thoughts from a Strata Lawyer website.
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Need some advice please?
Hi Donella
Allison Benson, Kerin Benson lawyers has responded to your comment within this article: NSW: Q&A Common Property Defects and Reimbursement for Repairs
My apartment is only 2 and half years old. Apartment started to flood . Called the plumbing firm that had plumbed the whole block of apartments. 2 tradesmen came to find the cause of the flooding! He checked the main bathroom no problem evidently. Then he removed the oven had to cut a big hole in the wall , lots of water behind the oven but no pipe were found. Then he pulled the fridge out of its cavity! He could hear water behind the fridge quite loud . He cut one big block of gyprock out then another one and then the 3 rd one he immediately found 2 x pipes had not been crimped at all before gyprock went up . They went away and came back with crimping tools. Did a full report admitted someone had failed to do the job and apparently had mark off that the plumbing was all correct before the gyprock went up. They are coming back to patch the walls up and clean up the area. My timber flooring has glue over a large area coming up through the joins . Are they responsible to replace my timber flooring that is ruined?
Hi Donella
The response to this recent Question on our site should assist:
Question: Due to recent storm events there was water ingress from common areas into my apartment, damaging floorboards. What is the process to fix the damage?