NSW: Q&A Owners Corporation Insurance Requirements in Strata

Sinkholes are typically classified under “subsidence,” which is a broad term that includes various forms of earth movement, such as landslides, landslips, mudslides, subsidence, and the heaving, collapsing, vibration, erosion, settlement, or shrinkage of earth. Most strata insurance policies have exclusions for such events, meaning they generally do not provide cover for any earth movement (other than earthquake), including sinkholes.

Unfortunately, this means that if a sinkhole occurs, it is something the owner or owners corporation will need to address as it is unlikely to be covered by the strata insurance (or any other form of insurance). I am not aware of any policy in the market that specifically covers sinkholes under standard strata insurance. While some insurers may offer optional subsidence coverage, this type of event is typically excluded from most policies. It’s important to review your strata insurance product disclosure statement (PDS) to fully understand what is and isn’t covered.

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 November 2024 edition of The NSW Strata Magazine.

Question: A lot owner wants the OC to file an insurance claim for fire damage caused by their tenant. The OC believes it’s the owner’s responsibility. Should the OC file the claim?

A lot owner’s tenant had a kitchen fire in the unit. The fire brigade was called. Damage was caused by the fire and by putting it out. The owner has requested the owners corporation (OC) lodge an insurance claim for the repair &/or replacement of damaged items, including the kitchen, carpets, doors, etc. As the fire was not the fault of the OC, is this reasonable? Why should owners contribute to the insurance excess and be affected by future strata insurance premium increases due to the claim? The OC believes this is a matter for the lot owner and their insurer if they have one. Should the OC claim against the building’s strata insurance?

Answer: As an insured party who contributes to the insurance and pays a portion of the premium, the owner has the right to claim under the policy.

Strata insurance is designed to cover damage to fixtures within a lot, including kitchen cabinetry, walls, and other permanent fixtures. These items would typically be covered under the strata policy in a fire. The only item not covered based on the prior email would be carpets, which can be claimed under a contents insurance policy.

It’s important to note that permanent fixtures cannot be insured by any other policy apart from the strata policy. This is due to the basic principle that insurers will not insure part of a building independently – the building must be insured under one policy. As such, the owner is limited to claiming on the strata policy for any damage to fixed property resulting from this event.

As an insured party who contributes to the insurance and pays a portion of the premium, the owner has the right to claim under the policy.

Strata legislation requires that the owners corporation insures the building for full replacement value, which includes fixtures inside a lot. The legislation does not provide the committee or owners the authority to prevent an owner from making a legitimate claim on strata insurance; this is, after all, the purpose of having insurance.

It is true that such claims can impact insurance premiums for all owners. However, when purchasing a strata property, owners buy into the collective claims history of that property. This means that just as they have the right to claim, potentially affecting the claims history, so too do other owners. If one wishes to avoid being part of a collective claims history, then strata ownership may not be the best choice.

Regarding the excess, while NSW legislation does not specify who should pay it, I believe the “benefit principle” should apply. Therefore, the lot owner who benefits from the claim (in this case, the owner with the fire damage) should be responsible for paying the excess.

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

This post appears in the October 2024 edition of The NSW Strata Magazine.

Question: My property is within a strata plan in NSW. The glass shower screen in the bathroom shattered due to an impact. Will strata insurance cover the repair since the shower screen is a fixture in my townhouse?

Answer: For a claim to be successful, the damage must exceed the policy excess.

Strata insurance policies are designed to cover sudden and accidental damage to items defined as part of the building under the Strata Management Act. This includes bathroom fixtures such as shower screens.

However, please note that a policy excess will apply. For a claim to be successful, the damage must exceed the policy excess.

Typically, lot owners, who are the beneficiaries of insurance claims, are responsible for paying the excess.

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

This post appears in Strata News #702.

Question: My floorboards are not original and were damaged by something unrelated to strata. Why must I process the claim through strata insurance and play such a high excess?

My contents insurance covered my floorboards with a $500 excess. After internal fixture-related water damage, a claim was approved, and a statement of work was signed. However, the insurance company requested a copy of my strata policy, which overrode my contents insurance. Now, I’ve been asked to pay a $10,000 excess.

The floorboards are not original, and the damage was caused by internal fixtures unrelated to strata. Why do they need to be covered by the strata policy, and why am I compelled to pay an excessive amount?

Owners who made claims on the strata insurance in the preceding years only incurred a $2,500 excess. How can this discrepancy be explained?

Answer: If your contents policy contains an exclusion for items covered by another policy, the strata insurance will take precedence over your contents policy.

In New South Wales, Section 161(4)(b) of the Strata Schemes Management Act 2015 No 50 outlines that temporary flooring, such as floating floors, is not required to be insured by the owners corporation. However, insurers may provide policies that surpass these legal requirements. For instance, some insurers automatically incorporate coverage for floating floors into their policies and do not provide an option to remove this coverage. Additionally, other strata insurers may offer optional coverage for floating floors, which can often lead to conflicting instances such as this one.

Strata Schemes Management Act 2015 No 50

161 Requirements for damage policy

Parts of building not required to be covered The following parts of a building are not required to be covered by a damage policy—
1. owners’ improvements and fixtures comprising paint, wallpaper and temporary wall, floor and ceiling coverings,

When it comes to home contents or landlord’s policies, the coverage and exclusions will vary. Typically, contents insurers will refuse coverage for items insured under a strata insurance policy due to exclusions in their own policy wording. For example, certain insurers specifically exclude coverage for items within strata schemes that are covered by an insurance policy taken out by the owners corporation.

For example, one insurer has the below exclusion in their policy wording for contents within strata schemes:

Not covered

items that are:

– covered by an insurance policy taken out by an owners corporation or similar body,

Regarding the excess applicable under the strata insurance, the excess specified in the policy at the time of loss will be enforced. In your case, it seems that the excess has risen from $2,500 in the previous policy to $10,000 in the current policy period. Such a high excess is usually imposed when there’s a history of water damage claims, significant losses from water damage, or unresolved waterproofing issues at the property.

Unfortunately, if your specific contents policy contains an exclusion for items covered by another policy, the strata insurance will take precedence over your contents policy. We suggest reviewing the wording of your specific content policy or consulting with your broker for further clarification.

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

This post appears in Strata News #691.

Question: For the past two years, we’ve been declined insurance due to the number of defects in the building. How do we know what the insurance companies see as the highest-risk defects?

The strata insurance for our 18-unit property in NSW has declined for the past few years due to the number of defects in the building. We do not have access to the builders warranty as the builder went bust.

We’ve been fumbling around and repairing defects we think are the most important. However, committee members are not builders, and we have been declined insurance again this year. We must return to NCAT for a second time and explain why we have no building insurance. How do we know what the insurance companies see as the highest-risk defects?

Answer: Prioritise rectifying defects that pose the greatest safety risk and risk of damage to the building.

Claims associated with builders warranty and, particularly builders not rectifying genuine defects can place an owners corporation in a very difficult position.

Seek advice from an insurance broker to find out what the owner’s corporation needs to do to become insurable.

If the reason insurers are declining is due to defects, I recommend the owners corporation:

Prioritise rectifying defects that pose the greatest safety risk and risk of damage to the building;

Have a clear plan in place for rectification of defects.

The engineer who conducted the defects report should be able to provide a priority order and timeframe for the defects to be completed. Please note, however, that although an engineer may state a defect is low or medium risk and needs to be completed within 24-48 months, as an example, insurers will likely still require those defects actioned as soon as practical to consider coverage.

As the consequences of no insurance are significant for owners, it may be worthwhile for the owners corporation to consider a strata loan, raising special levies or a combination of both to ensure the repairs are expedited.

Tyrone Shandiman

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

This post appears in the April 2024 edition of The NSW Strata Magazine.

Question: Are strata schemes encountering difficulties insuring pontoons for public liability, and if yes, what alternative insurance solutions are being pursued?

In our strata scheme of 34 townhouses, 13 are on a canal. Seven townhouses have strata approval and Council approval for decks built over the canal with a gangway and pontoon attached.

The decks are within the stratum of each lot. The owner maintains them as they are for each lots private use. Over the past five years, strata insurance has insured these pontoons with public liability and has noted the Council as the interested party. The pontoons were categorised as owner fixtures and improvements.

Our broker worked out the total cost of this and divided it between the pontoon owners, who then reimbursed the money back into the owners corporation. The canal is a 4-knot canal. Personal contents insurance will not include pontoons. There is no cost to owners who do not have a pontoon.

The strata insurance company has decided to no longer insure the pontoons for public liability. Are other strata schemes in a similar situation, and if so, how are they insured?

Answer: We strongly advise consulting with your insurance broker to tailor advice specifically to your OC’s unique needs and circumstances.

Strata insurance typically includes public liability coverage for areas and incidents for which the owners corporation (OC) is responsible, primarily focusing on common property. Since the decks are within the stratum of individual lots and designated for private use, with maintenance responsibilities resting solely on the lot owner, they are not considered common property.

In instances where injury or damage occurs on these privately owned decks or pontoons, the legal liability often shifts to the lot owner. Therefore, it’s essential for owners of these fixtures to have home insurance that specifically includes public liability coverage, ensuring that there are no exclusions that might affect claims related to the decks or pontoons. In accordance with the provisions of the Strata Scheme Management Act 2016, the OC must insure the decks for property damage, and this would be via the strata policy.

The desired outcome for this specific scenario is:

Owners corporation’s responsibility for property damage: The OC should ensure the pontoons are covered for property damage, fulfilling their obligations under the Strata Scheme Management Act 2016. Should the current insurer decline to provide such coverage, the OC is advised to seek an alternative insurer willing to offer cover that complies with their obligations under the Act.

Lot owner’s contents and public liability insurance: It’s imperative for lot owners to secure contents insurance that encompasses public liability coverage, importantly without exclusions that could negate claims related to the pontoons or jetties. This ensures that lot owners are personally protected against potential claims.

Comprehensive public liability insurance for the owners corporation: The OC should also ensure they have public liability insurance that does not specifically exclude the pontoons. While it might be deemed acceptable for an insurer to highlight, they will not cover liabilities specifically associated with pontoons under the direct control of a lot owner (as it is the likely outcome of what may happen in a public liability event), having a policy without explicit exclusions is advisable. This is crucial as the OC could face vicarious liability in the event of a claim, where the absence of specific exclusions provides a broader safety net against potential legal and financial repercussions.

In light of these considerations, we strongly advise consulting with your insurance broker to tailor advice specifically to your OC’s unique needs and circumstances, taking into account the specific details and available cover options.

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

This post appears in Strata News #688.

Question: Is there any insurance available to lot owners to cover the gap between what our strata building has insured my apartment for and the actual cost of rebuilding or repairing it?

Is there any insurance available to lot owners to cover the gap between what our strata building has insured my apartment for and the actual cost of rebuilding or repairing it?

I recently completed renovations on my two-bedroom apartment in Zetland. I’ve replaced the kitchen, main bathroom, ensuite and laundry. The cost of renovations was $230,000. If the apartment was destroyed, would our strata insurance cover the cost of returning my apartment to its current luxury condition? Can I take out any insurance for this?

Answer: It is the responsibility of the owners corporation to insure the property for its complete replacement value, inclusive of any renovations, as stipulated by the Strata Management Act.

Strata insurance cover is intended to return the property to the same condition as before the event. Separate gap insurance policies are neither offered nor necessary, as it is the responsibility of the owners corporation to insure the property for its complete replacement value, inclusive of any renovations, as stipulated by the Strata Management Act.

Also, it is important to highlight that buildings can only be insured under the property section of the strata insurance policy. They cannot be considered under contents policies.

The majority of strata insurance policies include cover for lot owners fixtures and fittings. The standard coverage is $250,000 or $300,000 per lot, and some policies include a percentage limit based on the building sum insured. This benefit is designed to cover instances where lot owners replace existing or install additional fixtures and fittings in their lot/unit without the owners corporation being aware of the 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 rebuild costs in addition to the building sum insured if a lot owner has upgraded their property without the owners corporation knowing or factoring this into the building sum insured.

Strata insurance policies are specifically crafted to account for owners renovating their properties. If you are unsure about the extent of coverage, we recommend that either the committee or the individual owner seek specialised advice regarding their policy from their insurer or broker.

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

This post appears in the December 2023 edition of The NSW Strata Magazine.

Question: Our strata plan does not include the structure on common property that houses our bins. Is this structure insurable if it’s not on the strata plan?

I have discovered that a recycling bin structure on the strata common property lot is not registered with the NSW Land Titles Office. I requested a copy of the strata plan, and the masonry structure housing recycling bins is not included.

Is this structure insurable (property and persons), given that it is not legally registered or represented on the strata plan?

Answer: Refer to the definition of “insured property” or “building” under a strata policy to understand the nature of the cover.

There is no specific requirement under a strata policy requiring a recycling bin structure to be on the strata plan for cover to apply.

Strata policies cover ‘outbuildings’ as part of the building insurance, and we would expect the policy to respond provided an exclusion does not apply, including if the recycling bin structure is an illegal installation.

I recommend reading the definition of “insured property” or “building” under a strata policy to understand the nature of the cover.

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

This post appears in the November 2023 edition of The NSW Strata Magazine.

Question: I am having trouble obtaining an insurance policy schedule for our strata building. The strata manager seems to think that, to understand our policy, all we need is the certificate of currency and the PDS. Should we receive a policy schedule?

Answer: The two documents we recommend you consult to understand the insurance are the policy schedule and the product disclosure statement (PDS).

As an owner in a strata building, there are two documents we would recommend you consult to understand the insurance. These are the policy schedule and the product disclosure statement (PDS). The certificate of currency does not include all relevant information.

A policy schedule and a certificate of currency serve two very different purposes. A policy schedule is a detailed document that provides specific details about the insurance policy. It outlines the policyholder’s name, policy number, coverage limits, excesses, endorsements and any other important provisions specific to your individual policy.

A certificate of currency, on the other hand, is a simpler document that serves as proof that an insurance policy is in force. It typically includes basic information such as policyholder’s name, the type of insurance coverage, the policy number, and the period for which the policy is valid and coverage limits. A certificate of currency is intended to be provided to third parties to demonstrate a valid insurance coverage is in place. A certificate of currency generally does not include excesses, endorsements and any other important provisions specific to your individual policy.

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

This post appears in Strata News #666.

Question: We have purchased an apartment and will have some renovations done before we move in. We have yet to be charged or paid any levies. Does the strata building insurance cover our property until we do?

Answer: The owner should reach out to the strata manager and ask for a copy of the certificate of currency so they can ascertain who the insurer is.

In NSW and other states and territories, it’s a requirement for strata schemes and community schemes to insure common property and, in many cases, fixtures and fittings within lots.

Relevant sections of the Strata Schemes Management Act 2015 are:

Sect 160 Owners corporation to insure building

Sect 161 Requirements for damage policy

Policy Disclosure Statements for the strata insurers are available online. The owner should reach out to the strata manager and ask for a copy of the certificate of currency so they can ascertain who the insurer is.

Andrew Terrell
Bright & Duggan
E: Andrew.Terrell@bright-duggan.com.au
P: 02 9902 7100

This post appears in Strata News #662.

Question: The final defects report hasn’t been submitted for our new Sydney building. We have no serious defects. Without the report, it is difficult to obtain insurance quotes. What do we do?

I live in a new strata building in Sydney. The final defects report has not been issued, but we know of no serious defects.

We are trying to find a competitive quote for strata insurance, but as the final defects report is unavailable, only one insurer has provided a quote. Can you advise what we should do to provide the best deal for the owners?

Answer: Request a short-termed policy (3 or 6 months) and approach insurers again after receiving the final defects report.

Defects are a topic of great concern currently. Buildings with defects or suspected of having defects are becoming increasingly difficult to insure. Strata insurers were previously willing to offer cover for strata buildings with specific terms, conditions and excesses applicable. This was designed to limit the insurer’s liability in a loss.

However, following the 2021 collapse of the Surfside Condominium (Miami, USA), a 12-storey apartment building collapsed, killing 98 and injuring 11. A legal settlement in excess of $1 billion was reached, covered in most part by insurers of varying parties, including the strata building, developer and security operator for the building. This worst-case scenario highlighted the exposure insurers have in covering defective buildings, particularly in instances where issues are known, as it increases the demonstrated negligence on the strata building.

Although, in your instance, the owners view there are no serious defects, the insurers will only consider the opinions of a suitably qualified professional. Unfortunately, without that final defects report, you have limited choice in who to insure with initially. Our advice would be to request a short-termed policy (3 or 6 months) and approach insurers again when the final defects report has been received for a more competitive option for the next period.

At the 13 minute mark of my recent lookup strata webinar, we delve into defects in greater detail: NAT: Strata insurance premium increases in 2023 – Committee considerations | LookUpStrata

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

This post appears in Strata News #659.

Question: Two owners in our townhouse complete have recently made water damage claims resulting from their negligence. Why is this allowed?

In our NSW Townhouse complex, lot owner A claimed $150,000 from strata insurance for water damage caused by a failed, rusted flexi-hose in an upstairs bathroom.

Lot owner B claimed $50,000 from strata insurance for water damage caused by a plastic external hose fitted to a tap attached to an ice-making fridge.

In both cases, wooden floors, stairs, and the kitchen were destroyed. Surely this is the owner’s responsibility to make good the damage? My strata company tells me that even if a child overflowed a bath and destroyed wooden floors, strata insurance would have to pay. I dispute this.

Answer: When you own a property in a strata building, you become part of the collective claims history of that building.

The owners are responsible for maintaining their flexi hoses and appliances. Regular maintenance and inspection can prevent potential damage and minimise the risk of accidents.

If these hoses or appliances cause consequential damage to the building, the claim for such damage can only be made on the strata insurance policy. Contents and Landlords policies generally do not provide coverage for building damage.

Strata insurance policies typically require “sudden and accidental damage” to occur for coverage to apply unless specific exclusions are stated. It is worth noting that negligence is not automatically excluded. Negligence can be excluded when it reaches the level of wilful damage or becomes a foreseeable claim.

Water damage is a common claim under a strata insurance policy, and we would expect the instances provided in the question to be considered by a strata policy, even where an owner accidentally leaves a bath on and it overflows.

The claims advised in the question will have an adverse impact on the claims history and, therefore, premiums and insurability, and we would expect the insurer to impose high water damage excesses for three to five years to encourage owners to maintain their property.

When you own a property in a strata building, you become part of the collective claims history of that building. The claims made by other owners can impact everyone’s overall premiums and cover. This is one aspect to consider when weighing the pros and cons of strata ownership.

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

This post appears in the July 2023 edition of The NSW Strata Magazine.

Question: Due to recent storm damage claims, our building narrowly missed being classified as a risky building. To avoid future claims, can we insist lot owners replace old and fraying hoses within their lot?

Last year, our strata committee made several strata insurance claims due to storm damage and developed a larger-than-usual claims history. We narrowly avoided being classified as a risky building. Being proactive, we plan not to make any insurance claims for the next three years and cover any damages that might occur from our owners corporation funds.

To safeguard against stormwater ingress, the committee have instigated an annual roof inspection, and to safeguard against burst water hoses, we have commissioned an investigation report of hoses in the bathroom and kitchen of all lots.

The report recommends that two lot owners replace old and fraying hoses within their lots. We are concerned these lot holders may not carry out the repairs, and in the event of a burst hose, the owners corporation will have to cover the cost of repairs. How do we ensure lot owners replace all old and fraying hoses so we can avoid the costs of water damage from burst hoses?

Answer: To my knowledge, the committee does not have the power to force a lot owner to maintain their property, but they can compel them to do so.

To my knowledge, unfortunately, the committee does not have the power to force a lot owner to maintain their property, but they can compel them to do so.

Most policies will have an exclusion for 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.

In the event of a claim, the insurer would likely decline a claim if they were made aware that the owner was aware of the maintenance issue.

The owner may then be liable for costs of repairing damage in their lot and other lots as well.

Duty of disclosure requires the owners corporation to notify the insurer of anything they know that might impact the insurer’s decision to insure you. You must notify the insurer when you take out a policy, at renewal or when you alter the policy. Failure to notify the insurer may result in them voiding your insurance policy.

A report which identifies old and fraying flex hoses technically forms part of the duty of disclosure obligations, and notification of such an issue can impact the building’s insurability.

If the lot owners do not take action to fix the maintenance issues, it is advisable to seek advice from your insurance advisor concerning your obligations regarding disclosure.

If the owner fails to maintain their property in good condition and this impacts your insurability, it may be worth considering mediation or adjudication in NSW Civil and Administrative Tribunal (NCAT) subject to seeking appropriate advice on the prospects of success from your strata manager or a legal practitioner.

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

This post appears in Strata News #648.

Question: Due to our roof surface, our solar panels are installed using weighs rather than nuts and bolts. Should our insurance company be informed of this to avoid confusion in the event of an insurance claim being made if the installation is damaged?

Around five years ago, solar panels were installed on the roof of our building servicing 32 units. The economic benefits of the installation are being realised.

As a result of a successful Home Owners Warranty claim, considerable remedial work was expended (completed in 2014) that included complete refurbishment /resealing of the roof area (level concrete). To minimise disturbance of the new roof surface, the solar panels are ‘fixed’ to the roof by weights rather than conventional nuts and bolts.

Should our insurance company be informed of the installation including the method of securing the panels to the roof to avoid confusion in the event of an insurance claim being made if the installation is damaged?

Should the owners corporation obtain a written warranty from the installer?

Answer: You need to tell the insurer anything that may increase the risk to them.

There are multiple questions here regarding both the building and the insurance.

Firstly, all buildings should be maintained to the relevant Australian Standards. There are Australian Standards for affixing solar panels. We would recommend the owners corporation ask the installer for a written warranty that the use of weights (rather than bolting the units down) is a compliant method of installation according to the Australian Standards.

The other questions revolve around what you need to tell the insurer. The basic answer to these questions is that you need to tell the insurer anything that may increase the risk to them.

The best advice we can give here is that the owners corporation tell the insurer everything they can about the building and let the insurer decide what increases their risk. Otherwise, the owners corporation faces a very real risk of assuming what may or may not adversely affect the insurer’s assessment. What happens when the owners corporation assumption is incorrect?

It is possible for an insurer to reduce the claim (to a zero payment) in line with the ‘level of non-disclosure’. However, in this case, it is more likely that the claim will be restricted to the level of non-disclosure. For example, most strata insurance policies will carry an exclusion for illegal structures or installations.

The following examples are from two of the larger strata insurer’s policies.

We will not pay under Policy 1 – Insured Property as part of the cost of Replacement for the cost to:

…….

rebuild, replace or repair illegal installations.

We will not pay for the cost to:

….

replace or repair illegal installations.

What these exclusions mean is that the item itself will not be covered for any damage sustained if the installation is not to Australian Standards. To be clear, what you have described is not ‘uncommon’. We have dealt with several cases just like this.

In one case ,the insurer declined to supply or install a replacement set of solar panels ($10,000) that were blown off the roof during a ‘storm’. In this case, the panels were secured by nothing other than gravity. The insurer did, however, cover damage to the building caused by the ‘impact of the loose solar panels to other parts of the building’.

It would be remiss not to mention that some strata insurers also have exclusions for ‘known defects’. These exclusions can also restrict cover for any damage caused by the item that is incorrectly installed.

In the above example, if the insurer could prove the owners corporation did know (or should have known) “that to not have the panels secured would not comply with the Australian Standards”, they may have also exclude cover for the damage caused by the ‘impact’ of the panels to other parts of the building.

Scott Driscoll
Driscoll Strata Consulting
E: scott@driscollstrataconsulting.com.au
P: 0409 632 003

This post appears in Strata News #643.

Question: Due to delays in correspondence between the broker and strata manager, our insurance policy expired before we renewed. What issues do we need to be concerned about?

Our strata policy was due for renewal and our broker provided quotes. Due to some delays in correspondence between the broker and our strata manager, our policy expired before we renewed. What issues does our owners corporation need to be concerned about before renewing?

Answer: As the owners corporation has a duty to have insurance in place at all times, I would recommend you ask the broker to confirm cover is in place as soon as possible.

It is best practice for brokers to issue quotes for an insurance renewal with sufficient time to allow the committee to make reasonable enquiries and provide instruction.

The General Insurance Brokers Code of Practice requires broker to take appropriate, professional and timely steps to seek insurance cover terms and conditions and advise clients of available options (if any) for their consideration.

In the absolute majority of instances, a broker will usually issue a quotes for a renewal 14 days prior to the policy expiring, however in some cases this may not always be possible.

Where the holding insurer has offered renewal, the broker will be in a position to maintain cover with that insurer.

Generally, for new insurers, they do not place a policy or back date the cover for a policy after it has expired, but there is more leeway with maintaining a policy with an existing insurer.

If you have a number of insurers you are considering, the broker should do all things possible to preserve your ability to place cover with those insurers.

As the owners corporation has a duty to have insurance in place at all times, I would recommend you ask the broker to confirm cover is in place as soon as possible.

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

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

Question: If a visitor parked on common property and damaged a tap/pipe by hitting it with his car, who is responsible for the cost of the plumbing repair?

Answer: Whether accidental or intentional, damage to property is the responsibility of the person who caused it.

Whether accidental or intentional, damage to property is the responsibility of the person who caused it.

For this specific scenario, third party insurance claim on the vehicle owners motor insurance may be relied on.

Emergency repairs may be necessary in this scenario as there is a potential slip and fall safety issue and damage to property if the burst pipe is not fixed quickly. The owners corporation is within its rights to repair and maintain its common property in accordance with section 106 of the Strata Schemes Management Act and seek to recover those costs at a later date.

The owners corporation would need to identify the visitor. The vehicle licence plate should be noted.

There are then avenues to recover the costs:

Attempt to resolve it directly with the other party, by seeking reimbursement of the costs (in this case, plumbing).
This should be done by sending a letter of demand to the third party which outlines:
1. A summary of the event including date and what happened (you may include photos).
2. Why you feel the third party is responsible.
3. A summary of the expenses incurred (include quotes or invoices).
4. How you can be reimbursed (bank account details.
5. Action you will take if your demands are not met (referral to NCAT).
6. A recommendation to the third party to refer the letter to their motor insurer.

Lodge an incident report with the local police so there is a record. This may be useful if negotiations fail, and should be done as a matter of precaution even if the owners corporation is in dialogue with the person. The police should also be able to assist in identifying the person and that could eventuate to a third party insurance claim on the vehicle owners motor insurance.

If attempts to recover costs from the third party is not successful and the claim is above the policy extends, an insurance claim can be lodged. If it is commercial to do so, the insurer will pursue a recovery from the third party and of they are successful, the insurer will refund the excess and the claim will show as a $0.00 claim (or potentially include recovery costs if it is referred to a debt collector).

Tim Sara
Strata Choice
E: tsara@stratachoice.com.au
P: 1300 322 213

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

This post appears in Strata News #633.

Question: Around 70% of apartments in our strata plan are holiday lets. Can we introduce a bylaw stating all landlords must have landlord insurance? Will this protect the owners corporation from third party liability claims?

Is it recommended that the owners corporation be indemnified where, in a resort strata plan, around 70% of apartments are holiday let? It is difficult to confirm that owners hold a current landlords insurance policy.

Our Secretary suggests we should insert a by-law into our rules that states we require all leased apartments to have mandatory landlord insurance. Does this indemnify the owner corporation from third party liability for accidents occurring inside the apartment? All leased apartments are maintained to a high standard by the owners corporation and/or the owner.

Lawyers cast the net wide in any personal injury claim and we wish to ensure the owners corporation has no exposure as a second respondent in any claim. the owners corporation carries $60m public liability insurance for incidents occurring on common property.

Answer: I do not believe the owners corporation has the jurisdiction to mandate that lot owners must take out a certain type of insurance.

I do not believe the owners corporation has the jurisdiction to mandate that lot owners must take out a certain type of insurance. That is entirely a decision for the lot owner.

Mandating owners hold current landlords’ insurance will not remove the owners corporation’s exposure if they become a respondent to a personal injury claim.

If the owners corporation is named as a respondent, that owners corporation will need to respond to the claim regardless of whether the individual lot owner has landlords insurance or not.

Legal liability claims are 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 and solicitors may cast the net wide and name various parties including lot owners and the owners corporation.

The purpose of legal liability for a strata policy is to ensure the owners corporation have cover should they be named in a claim for personal injury or property damage.

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

This post appears in Strata News #631.

Question: During a recent weather event, our basement came close to flooding. If we install temporary flood barriers for future events, would the OC be liable for any damages despite our attempts to prevent flooding?

Our strata building is located on a beachfront. Earlier this year, the sea wall was overtopped and this coincided with a blockage of a major drainage system. There was localised flooding and when the neighbouring building started to pump out their basement, our basement car park came very close to being flooded.

With the recent La Nina alert and the prospect of more localised flooding, it’s been proposed that we install a temporary flood barrier or even sandbags across our driveway to protect our basement in the event of significant localised flooding.

As this would restrict vehicles exiting the basement, there is concern that we could be liable for any damages should the barrier fail or the basement floods via another route. Would the Owners Corporation be liable for such damages even though we would be trying to prevent flooding? Would restricting access to and exit from the basement carpark be an issue? Do we have the right to request the neighbouring property slow or stop pumping if our basement came under threat?

Answer: These decisions, as shown, are not ones of ‘set and forget’. They will require constant review based on what is happening at the time and what emergency advice was given by the authorities.

Every industry uses jargon and the best I can say is, for those not within the specific industry – jargon is likely to lead to misunderstanding. We are unclear as to whether the question relates to

Storm Surge or tidal action,

flooding or inundation

this information would influence the answer given and would affect the result.

As to the actual questions posed-

In all cases, in the event of possible flooding and/or inundation, the owners corporation would have the ability and responsibility to ‘protect’ their property or mitigate their loss.

An example of such mitigation would be the neighbour’s action to pump out the water.

The neighbour, however, should not allow the water to enter another property. They may also be unaware that this is occurring, therefore if the water being pumped out did start to enter your property, then yes, you not only have a right but a responsibility to ask them to stop the pumping. However, the actual event of water entering your property is different from the perceived risk as stated – “if our basement came under threat”.

Sand bagging or a temporary flood barrier, while one’s definition of ‘temporary’ may need to be questioned here, it would be considered attempted mitigation if the owner’s corporation installed sandbags or another temporary flood barrier.

As to the question of Liability – this is somewhat harder to answer. Ultimately, this question is for the courts to decide.

If the Owners Corporation in their effort to mitigate their loss, caused a resultant loss to someone else’s property and it could be proven that the resultant loss should/could have been foreseen, then the action may be considered negligence and therefore the resultant loss would be covered by the at fault party.

Let’s return to the first scenario of the neighbour pumping out their basement.

If the water started to enter your basement and you notified the neighbour who then did not stop the pump out, then they may be considered liable by a court for the damages caused.

However, where sandbagging was in place, and water inundation / flooding still occurred then the first question asked would likely be, did the bagging cause the inundation or were the conditions simply more then the bagging could resist? We again reiterate – these decisions are ultimately for the courts to decide.

Finally, we would suggest restricting access to the basement during an event may well be considered prudent, especially if the temporary barrier was the only thing stopping the inundation. Any other action may endanger life rather than property and this would be considerably worse. However, if the temporary flood barrier was not actually performing the required job, then allowing access and egress may also allow others to mitigate their losses.

These decisions, as shown, are not ones of ‘set and forget’. They will require constant review based on what is happening at the time and what emergency advice was given by the authorities.

For example, sandbagging may be completed and then an evacuation order is given. If the owners of the property decide to leave their belongings in the basement and evacuate and the bagging fails, the evacuation order would mean that the Owners Corporation could not stay to monitor. In this case, the court may determine there is no liability.

Scott Driscoll
Driscoll Strata Consulting
E: scott@driscollstrataconsulting.com.au
P: 0409 632 003

This post appears in Strata News #618.

Question: Our duplex was damaged beyond repair. Our insurer insists on paying funds into a joint account and the other owner will not allow me access to the funds to pay out my mortgage on the property. Can the insurer pay the settlement directly to lot owners?

Our two-unit strata had 50%/50% entitlement with one shared wall and fence. There were no other shared assets. The building insurance premiums were paid in equal shares. Our insurer deemed the building as a full construction loss. Both lots are a part of the same building and are beyond repair.

There is the intent of financial abuse in the event this claim is settled in the owners corporation joint account of the two owners. I require access to my proportion of the funds from the joint account to pay the bank loan for my property from my share of the settlement. Strata Schemes Management Act 2015 Section 169 subsection 2.a.

My mortgage payments for the unit continue even though the property is beyond repair and no longer providing a rental income. The owner of the other unit will not allow me to use the insurance funds to pay my mortgage. I requested our insurer to consider their duties of good faith and allow for some flexibility but they refused to pay the amount separately.

Answer: Insurers will only make payments for claims settlements into an account of the Owners Corporation.

The Strata Schemes Management Act 2015 provides guidance on how insurance must be taken out, but it does not provide the same level of guidance for claims (particularly total loss claims that need guidance).

Firstly, insurers will only make payments for claims settlements into an account of the Owners Corporation. What happens with settlement money must be agreed to by owners. Usually this is done democratically, but in the case of a two-lot scheme, an agreement may not be as easy to achieve if the owners have differing views on how the claim should be settled – in such instances the owners may need to involve legal representatives, Fair Trading NSW or NCAT.

Most strata insurers will have a provision for loss of rent (landlords) or temporary accomodation (owner occupiers) and this has the effect that your financial circumstances are preserved while the claim is being finalised. This portion of the claim should be able to be paid directly to the owners. The lot owners should speak with the insurer (or their assessor) and request they make progress payments for loss of rent directly to them for this portion of the claim so that each owner can meet their mortgage commitments.

With regard to the claim, the owners need to reach an agreement as to whether they rebuild or accept a cash settlement for the claim (and sell off the land). If the owners agree to rebuild, the insurer and their assessor should manage the rebuild process and continue to pay loss of rent/accomodation costs during this period.

If they agree to a cash settlement this process can be more complex and involvement of legal representatives is recommended to ensure funds are settled fairly to each lot owner. A cash settlement may also mean that the insurer stops payments for loss of rent/temporary accomodation when they make the settlement (where they would have continued to pay the rent if the owners used the insurers builder to manage the construction and rebuild).

If owners can not agree on a claim outcome, then we would recommend contacting NSW Fair Trading for advice on how to resolve this or alternatively they may engage legal practitioners.

In this particular instance, I would also recommend the owner contact their bank to discuss the circumstances.

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

This post appears in the November 2022 edition of The NSW Strata Magazine.

Question: Are there insurance options that cover additions to a strata lot that have been approved and completed under a by-law?

Are there insurance options that cover additions to a strata lot that have been approved and completed under a by-law and which are neither considered ‘contents’ for contents insurance or fall under strata insurance? An example would be an outdoor patio.

Also, where a bathroom renovation has been approved and completed under a by-law, would strata insurance still be responsible for the pipes, walls etc in case of damages or loss as a result of fire etc?

Answer: Between the strata insurance and contents insurance, all domestic items should be covered in the property.

The basic principle with insurance in strata is that, between the strata insurance and contents insurance, all domestic items should be covered in the property (excluding vehicles).

How we best explain the difference between strata insurance and contents insurance is if you pick the unit up and shake it anything that falls out is lot owners contents + temporary flooring such as carpet, blinds & curtains, and appliances that are not permanently attached.

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

We recommend referring to the insurers policy for the definition of “insured property” or “building” to fully understand what the strata insurer covers.

In this instance it appears that the property in question is covered by strata insurance.

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

This post appears in Strata News #606.

Question: Does contents insurance cover porcelain floor tiles fixed to the floor?

Are tiled porcelain floors covered by the strata’s building insurance, or are they covered by the lot owner’s contents insurance?

If the flooring is glued or fixed to the floor, is it covered by building insurance? My tiled flooring was installed after the construction of the building. I’ve been allowing for this in the total insured amount on my contents insurance. I asked this question recently when renewing my contents insurance and the representative could not answer this question.

Answer: Strata insurance policies cover all permanent fixtures including permanent flooring.

Strata policies cover all permanent fixtures including permanent flooring.

Owners over time may renovate their property and those newly added fixtures will be insured through the strata policy.

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, and paint & wallpaper (NSW only).

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

This post appears in Strata News #582.

Question: If an owner damages his garage door not once but 3 times by driving into the door, who is liable for a claim to have it replaced?

Answer: The garage door forms part of an insurance policy that the owner is an insured party to.

The owner is responsible to maintain their property, however the garage door forms part of an insurance policy that the owner is an insured party to.

Therefore, the owner is able to make a claim on the strata insurance policy.

The owners corporation may on charge the excess to the owner.

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

This post appears in Strata News #580.

Question: I’m a commercial tenant in a strata property with street frontage. Am I required to insure the glass for breakage if it is already covered under the strata insurance?

I am a tenant in a commercial property in a strata building. My office is on street level with a glass frontage. My landlord has asked me to insure the glass.

Wouldn’t this be covered under the strata insurance? If there was a breakage, whose insurance would the claim be under? I feel it is pointless having the glass insured twice. Isn’t it double-dipping if I also insure the glass? My landlord insists this is in my lease and it is my responsibility.

Answer: To avoid an issue where the tenant has an uninsured loss, landlords may from time to time require that the tenant also holds glass insurance cover.

Strata insurance policies to insure fixed glass are subject to the policy excess.

As a tenant does not have an insurable interest in the strata insurance policy, they are not able to make a claim on the policy.

If the glass is damaged as a result of the tenants’ actions and there is a claim, the insurer will seek a recovery against the tenant, so tenants should not be under any illusion that the strata policy will cover their interests.

To avoid an issue where the tenant has an uninsured loss, landlords may from time to time require that the tenant also holds glass insurance cover.

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

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

Question: Our committee has not repaired water ingress from a balcony into garages for well over a year. Are the committee members who neglected to repair the leaks over this considerable period financially responsible for resulting repairs?

Our committee has not repaired water ingress from a balcony into two garages for well over a year. They’ve agreed to allow an unlicensed lot owner to carry out the building and waterproofing repairs. If they go ahead with this decision and there are consequences resulting from amateur workmanship later, perhaps much later, what is our position with insurance? If there are other consequences such as concrete cancer because of the prolonged water ingress, are the committee members themselves who have neglected to repair the leaks over this considerable period financially responsible for those resulting repairs?

Answer: You may find that the insurer may not cover any extra damage that has occurred since the Owners Corporation have been aware and not fixed the source of the leak.

Good question. Most policies will exclude damage caused by building errors, emissions or defects that you were aware of. With regard to the one year wait, you may find that the insurer may not cover any extra damage that has occurred since the Owners Corporation have been aware and not fixed the source of the leak.

In regard to damage that happens as a result of an unlicensed tradesperson. You may get some pushback from insurers on that particular issue. You could argue that there was no knowledge that the workmanship was defective. But the insurer doesn’t cover rectification of any defective workmanship, so they won’t cover redoing that work. But you could argue that there was lack of knowledge that it was defective, but you may get some pushback in that.

Questions of who is liable? I guess it’s best answered by a solicitor. You could run an argument that the committee are liable. I know that there are protections in various states for committee members that act in good faith. It does differ from state to state and that is a very specific legal question that would probably be best answered by a solicitor.

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

This post appears in the May 2022 edition of The NSW Strata Magazine.

Question: The ceiling in my top floor unit is damaged. Who is responsible and what can I do to resolve this situation?

The ceiling in my top floor unit is damaged. I have advised strata and they state that the painting of the ceiling needs to be covered by my contents insurance. I have called my insurance company and they said it should be covered and fixed by strata insurance.

My strata manager keeps pushing back. Who is responsible and what can I do to resolve this situation?

Answer: If the strata insurer does not provide cover we recommend you request a denial letter from your strata insurer and then send this to your content’s insurer for consideration.

In NSW, paint and wallpaper is not required to be insured by strata insurance, although some policies provide cover. We recommend you first seek to make a claim on strata and if the strata insurer does not provide cover we recommend you request a denial letter from your strata insurer and then send this to your content’s insurer for consideration.

If the strata insurer’s denial for the ceiling damage is due to the damage falling below excess (and not because it isn’t covered by strata insurance) the contents insurer may not offer cover.

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

This post appears in the May 2022 edition of The NSW Strata Magazine.

Question: Whose insurance covers internal walls and built-in furniture in a strata apartment?

A recent article in your magazine on insurance suggested that a Lot owner is responsible for insuring all the items which would fall out if the unit was turned upside down. This obviously covers things like washing machines and furniture. Whose insurance covers internal walls and built-in furniture?

Answer: Furniture which is permanently affixed to the building and cannot be removed at the end of occupancy can be considered by strata insurance.

Internal walls (that are not temporary walls) are covered by strata insurance as part of the building. Notwithstanding paint & wallpaper is excluded by certain policies (contents insurance).

Furniture which is permanently affixed to the building and cannot be removed at the end of occupancy can be considered by strata insurance. For the avoidance of doubt, the owner should seek clarification from their strata insurer that the furniture is covered by strata insurance or consider factoring any built-in furniture into contents sum insured.

The basic principle is if you have strata insurance and contents insurance with a reputable insurer, between the two policies items in the lot (excluding vehicles), should be covered by one of the policies.

We 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 peace of mind.

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

This post appears in Strata News #556.

Question: What can we do if, due to our claims history, we are unable to get strata insurance?

Since insurance cover is a legislative requirement, what can the committee do when insurance companies do not wish to cover us because we have had too many claims?

Our premium has nearly doubled in the last 4 years and only one company agrees to insure us. What If we have more claims and no company wants to insure us next year? What do we do then?

Answer: Where a building shows a consistent history of claims, insurers will usually apply hefty excesses or exclusions for the problem claims.

It is extremely rare to have no insures offering a policy solely due to claims history. Where a building shows a consistent history of claims, insurers will usually apply hefty excesses or exclusions for the problem claims. This usually compels the owners corporation and lot owners to take preventative maintenance actions.

Where compliance with the building insurance requirements is impracticable (i.e. you can’t get insurance), section 172: Exemption by Tribunal from building insurance requirements of the Strata Schemes Management Act 2015 allows an owners corporation apply for an exemption from the building insurance requirements.

Presumably this application would require you to demonstrate you have taken all reasonable steps to exhaust your options.

If you have difficulty in getting insurance, you should discuss your options with your insurance broker or strata manager.

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

This post appears in the November 2021 edition of The NSW Strata Magazine.

Question: There seems to be a growing trend of developers building townhouse schemes where the total structure is a lot owner’s responsibility. How does the Owners Corporation insure common property, as it’s not common property but lot property?

Answer: The owners corporation must insure property defined as building in the Strata Management Act.

An owners corporation must insure property required by applicable strata legislation. That does include property that a lot owner has a responsibility to maintain. For example, a lot owner is responsible for the maintenance of kitchen cabinetry, however the cabinetry being a permanent fixture is the responsibility of the owners corporation to insure.

If there is insured damage, the strata insurance policy will respond to cover damage to property insured by the policy (including the kitchen cabinetry). Any damage not covered by the strata policy including maintenance or wear and tear becomes the owner’s responsibility.

The owners corporation must insure property defined as building in the Strata Management Act. This includes owners’ improvements and owners’ fixtures forming part of the building and building consisting entirely of common property. Therefore, the owners corporation must insure common property.

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

This post appears in Strata News #513.

Question: Do I need common building insurance for my detached Duplex?

I own 1 unit in a duplex strata scheme. Our units are completely separate, without any common walls, and are divided by a wooden fence.

Do I need common building insurance with the other unit under NSW strata regulations? Or can I obtain separate insurance for my unit alone?

Answer: In some cases, there may be not requirement for common building insurance.

For strata schemes comprising of two lots, Section 160 of the Strata Schemes Management Act states there is no requirement to insure building in cases where:

the owners corporation so determines by unanimous resolution, and

the buildings comprised in one of those lots are physically detached from the buildings comprised in the other lot, and

no building or part of a building in the strata scheme is situated outside those lots.

It should however be noted that the body corporate are required to insure public liability for a minimum of $20,000,000 in accordance with Section 164 (and applicable regulations).

The owners corporation will need to maintain a public liability policy to comply with legislative requirements and therefore it may be more cost effective for owners to maintain a strata policy for the buildings and separate contents insurance.

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

This post appears in Strata News #498.

Question: Can the Strata Plan secure more than one broker’s quotes for our Strata Plan’s annual Insurance Coverage? Our broker advised us that we can only go through one broker. Is this true or false?

Answer: That’s not correct.

That’s not correct. So we obviously, being a broker ourselves, we compete against other brokers for the insurance. The holding insurer that holds the insurance policy will reserve specifically to the broker that insures the policy through them. And there are some insurers that will reserve to one broker at a time as well. But there’s absolutely no reason why the Owners Corporation cannot seek the services from two brokers, and tenders from two brokers, for the insurance renewal.

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

This post appears in Strata News #496.

Question: In my experience, quantity surveyors overvalue the building insurance valuation and engaging a valuer experienced in building insurance valuations is best. Is this correct?

Answer: I would recommend using a quantity surveyor, and I know that there are a lot of valuers out there that are not qualified quantity surveyors.

Correct, I would recommend using a quantity surveyor, and I know that there are a lot of valuers out there that are not qualified quantity surveyors.

Australian Institute of Quantity Surveyors

You can go on the Australian Institute of Quantity Surveyors website and search whether the person that’s providing the valuation is actually a registered quantity surveyor. The valuers that we recommend to our clients use a cost per square metre guide and they use the Rawlinsons Guide. This is the industry respected guide.

Quantity surveyors will not insure you or recommend a sum to the very dollar. They will always allow a margin for error, should there be a total loss. This is because the consequences of under insurance versus over insurance is very obvious if there was to be a total loss claim.

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

This post appears in Strata News #494.

Question: Do we need to inform our insurer about installing ceiling insulation batts in our roof cavity where there are many cables?

Some owners in our strata building wish to install ceiling insulation batts in our roof cavity where there are many cables and electrical wiring.

Does a NSW owners corporation need to alert our building strata insurer about this proposed work? I am concerned that the installation of batts may increase fire risk in the ceiling cavity given the presence of all the cabling. Our building is 60 years old and has older wiring.

Answer: There’s no specific requirement that you must notify the insurer every time you do something to the building.

There’s no specific requirement that you must notify the insurer every time you do something to the building.

When it comes to your disclosure requirements:

You must answer all questions the insurer asks you with regard to arranging insurance. I don’t believe that they will ask specifically about whether the batts are installed, or about batts that are installed.

You must disclose all things relevant to the insurance decision to insure you. So what the committee really needs to do is if they become aware that the installation is non compliant (from a professional builder), they would need to disclose that to the insurer. But if you’re concerned but don’t have anything to support, that the installation wasn’t compliant, then there may not necessarily be a need to disclose that to the insurer because provided that the builders have put the batts in and they comply with the applicable, building regulations and codes, then there would be no need to then disclose the additional batts in the ceiling to the insurer.

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

This post appears in Strata News #492.

Question: If there is no owners corporation in a NSW Duplex and both lot owners only pay the annual strata insurance premium, are both lot owners legally and fully covered by the policy?

If there is no owners corporation in a NSW Duplex and both lot owners only pay the annual insurance premium, are both lot owners legally and fully covered by the so called ‘ STRATA’ policy?

The other lot owner in my duplex does not want an owners corporation and will not pay for a strata management company. They have a tenant renting the property.

The insurance company say they will not email me with confirmation that we are indeed fully and legally covered, but they will send a copy of the policy when the account has been paid.

Answer: If it’s a strata policy with an Australian insurer, generally their policy wordings will comply with the act

You have a requirement in NSW to insure for full rebuild value. The best way to ensure you comply with that requirement is to get an insurance rebuild valuation done by a quantity surveyor. The next requirement is to ensure that you have public liability for a minimum of 20 million in NSW.

Provided you’re meeting those two requirements, I guess on a base level, it does comply. There are obviously other things that are required of the policy, but if it’s a strata policy with an Australian insurer, generally their policy wordings will comply with the act.

Insurers normally won’t go outside of what is already in writing in the contract and their policy wording. The main thing for you as the owner is to ensure that the sum insured matches the rebuild value, and you’re insuring a strata policy with an Australian insurer. Generally, you’ll find that what you’ve got in place is compliant. You can if you want, but there’s no specific need to engage a strata manager for a duplex. Whether you do or don’t have a strata manager doesn’t impact your compliance around the insurance policy.

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

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

Question: The Risk associated with Flooding, earthquake etc are rated as extremely low and, from a statistics viewpoint, unlikely to happen. Does the insurance industry rate our area as per a group of postcodes?

We are concerned our Property Insurance is too expensive based on a total loss scenario.

Due to the layout and construction of our scheme, fire hazard and its associated risk is low. The associated risk of the complete complex burning down would be rated as extremely rare or very unlikely based on any reasonable reference matrix chart as we have multiple separate buildings.

We are currently insured on the basis that total destruction is inevitable and the rebuilding of the entire site would be the outcome?

Is there space within the Insurance industry to consider the cost of strata Insurance based on the complex‘s layout and its subsequent risk assessment other than total destruction.

The Risk associated with Flooding, earthquake etc are rated as extremely low and, from a statistics viewpoint, unlikely to happen. Or does the insurance industry rate our area as per a group of postcodes?

Answer: Insurers don’t just rate on postcode.

Insurers don’t just rate on postcode. Rating by insurers looks at a number of factors, including construction, the number of levels, how many buildings there are, the roof space, so obviously a greater roof space, there’s a high potential for Storm Damage, or is it a high rise building with sprinklers and so on? So insurers do look at the building and the matrix of the building.

I sat down with an insurer once and they said they rate on a maximum any one loss of 40% for certain buildings. I guess what you’re saying is probably correct for your building, but insures in the questions that they asked they do form their own risk profile of your building as well, and they do rate on risk and the premiums are reflective of this.

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

This post appears in Strata News #475.

Question: Does strata insurance cover public liability for parking bollards installed on non-common areas, ie they are on strata title. Also, does it cover public liability for private skip bins and other gear that is kept on strata title parking lots?

Answer: Cover under a public liability policy is subject to the terms, conditions and exclusions that apply at the time after the insurers assessment of the claim.

Generally speaking, strata insurance policies provide cover for liability for personal injury or property damage in connection with the ownership of common property.

If the bollards are on the strata title and a claim was made against the owners corporation the policy would indemnify the owners corporation, but not withstanding the insurer may seek to deny liability to the claimant if they believe a reasonable defence exists (for example if the bollards were not on common areas and for the exclusive use of a lot).

Liability claims are considered on a case by case scenario by insurers, solicitors & judges (if the claim ends up in court) and for this reason it is not possible to give a “one size fits all” answer to a hypothetical scenario as there can be number of factors that can change the outcome of any liability claim.

Upon lodgement of a claim, the insurer will review the circumstances and after seeking legal advice, will either defend the claim or seek to settle the matter, depending on the insurers view of what is the most commercial outcome factoring in expenses (such as defence costs & settlements) and the insurers view on prospects of successfully defending the claim.

Cover under a public liability policy is subject to the terms, conditions and exclusions that apply at the time after the insurers assessment of the claim.

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

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

Question: A motorcycle was stolen from common property. Would this be covered under the Strata’s insurance as it was parked on common property?

My son recently had a registered motorcycle stolen from the designated bike rack area in our P2 car park level which is protected by a swipe access roller door.

Would this be covered under the Strata’s insurance as it was parked on common property?

Answer: The only way a claim for a stolen motorcycle to be considered under strata insurance is a public liability claim made against the owners corporation.

Strata insurance covers building & common are contents as defined in strata legislation.

Motorcycles do not fall within legislative requirements for strata insurance and are therefore not covered by the property section of a strata insurance policy.

The only way a claim for a stolen motorcycle to be considered under strata insurance is a public liability claim made against the owners corporation. The motorcycle owner would need to demonstrate that the owners corporation were legally liable for the loss sustained. A common claim under a public liability policy is negligence, being that the owners corporation had a duty of care to the motor cycle owner and that they breached that duty of care.

While the standard of care imposed on an owners corporation is high, it is not unlimited. Defences to a negligence claim by the motorcycle owner may be that the owners corporation does not have a duty of care to secure the motor cyclists property (it is the motor cycle owners responsibility) and also that they took all reasonable actions in the circumstances to secure the car park. The owners corporation may also have specific defences in their by-laws specific to the property in question.

We always recommend that the motor vehicle / cycle owner contact their motor insurer in the first instance to make a claim and if the motor insurer believes the owners corporation are legally responsible they can pursue a recovery against the owners corporation.

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

This post appears in the March 2021 edition of The NSW Strata Magazine.

Question: We run a SEPP 55, over 55’s independent living strata titled retirement village with 104 properties. Do we need special property insurance because we are a retirement village?

We run a SEPP 55, over 55’s independent living strata titled retirement village with 104 properties.

Is there any reason why we need special property insurance because we are a retirement village?

As property insurance only relates to the property, can standard strata insurance apply rather than us being in a special class and potentially more expensive class grouped with Aged Care?

Answer: It can sometimes be more appropriate to insure under a strata policy, but it can sometimes be more appropriate to not.

It does depend on the insurer and what the insurance guidelines are. It can sometimes be more appropriate to insure under a strata policy, but it can sometimes be more appropriate to not.

With retirement villages, I do know that some strata insurers don’t insure retirement villages, and in that case, it might be more appropriate that the village is placed on a separate property policy with an insurer that does insure retirement villages.

It is an individual, case by case situation whether it’s appropriate to ensure with strata or separately. What the broker should be doing is at least canvassing all the strata opportunities with all the strata insurers, and also others and reporting to the committee or the owners Corporation: ‘Here are the results of the quotes that we’ve sought’.

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

This post appears in Strata News #408.

Question: Does Insurance cover any structure that is not compliant with the BCA or any damage from fire that emanates from that structure?

Does Insurance cover any structure that is not compliant with the BCA or any damage from fire that emanates from that structure?

I’m in NSW and I live in a block of 8 villa units. The unit next door to me has put a roof on a car port on the boundary with me. They have then put on solar panels and an inverter, which overheats. I live in fear of not being properly insured.

Is it is unlawful to put a roof to the boundary unless there is also a fire wall? Our Strata management has been no help.

Answer: Insurers do not give advice on whether a building is compliant.

I’m going to quote one of the most widely used policies out there in the market. Insurers do not give advice on whether a building is compliant. They will only assess compliance of building codes at the time of a claim, and determine if that meets one of the policy exclusions or not.

There are three major exclusions that owners should be aware of:

insurers do not pay for the cost of replacement, for the cost to rebuild, replace or repair illegal installations (so they don’t cover the installation itself).

They do not cover damage caused by non rectification of a property defect error or omission that you were aware of, or should have been reasonably aware of.

they also do not cover the cost of rectifying the faulty or defective materials or faulty or defective workmanship design or specification.

I think there are some exclusions that might apply to that situation. I guess it comes down to knowledge of the defects. Who is saying that this property isn’t defective? Is it a lot owner that may not fully understand the legislation and the building codes? Or is there an engineer or builder that’s pointing it out to the body corporate or owners Corporation as being a defective structure?

If the owner doesn’t feel that the issue is being addressed, as always try and resolve the issue with the committee and an owners Corporation without it being a conflict. There are always dispute mechanisms available through NCAT if you don’t feel that you’re getting satisfactory responses from the owners Corporation.

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

This post appears in Strata News #389.

Have a question about insurance requirements in strata or something to add to the article? Leave a comment below.

Read next:

Visit Strata Insurance OR NSW Strata Legislation pages.

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Comments

Helen Toombs says

August 17, 2023 at 6:09 am

I am Strata manager of 2 dwellings, mine is larger than my neighbours , how do I work out what percentage of the insurance costs or do they have to have their own strata insurance, my husband was in control but recently passed away, so I need some guidance. Regards Helen

Richard d'Apice says

February 14, 2023 at 10:06 am

The response to the question about a visitor’s car damaging a tap says “For this specific scenario, compulsory third-party (CTP) insurance can be relied on.”

In NSW compulsory third-party (CTP) insurance responds to personal injury caused by moror vehicles and not to property damage.

https://www.sira.nsw.gov.au/insurance-coverage/CTP-insurance-Green-Slips#:~:text=A%20Green%20Slip%20is%20a,matter%20who%20is%20at%20fault.

- Nikki Jovicic says
  
  February 16, 2023 at 10:57 am
  
  Hi Richard
  Thanks for the feedback. The article above has been amended.
  
Michael temple says

February 14, 2023 at 7:16 am

I have a unit with concrete cancer which has been witnessed by the strata committee for over 3 years. Major works are being organized but this is proving a very slow process. Meanwhile I have been advised by the engineer it is not safe to tenant. I have been without a tenant for more than 18 months now & still no work is due to start.
Is strata liable for my loss of rent as a result of this slow process?

- Nikki Jovicic says
  
  February 21, 2023 at 10:40 am
  
  Hi Michael
  
  These recent Q&As should assist:
  
  Question: After buying an old apartment, we discovered concrete cancer in the floor. There is little money in the owners corporation’s sinking fund. We can’t really move in until the work has been done. What do we do?
  
  Question: Despite repeated requests, the OC has failed to rectify water ingress defects in my unit. Can I seek reimbursement for nuisance and loss of income from them for not addressing the defects?
  
Scott Driscoll says

November 9, 2022 at 9:43 am

Question: What can we do if, due to our claims history, we are unable to get strata insurance?

Has the Owners Corporation considered looking at the claims and the causes of the claims, – all insurers will look positively on an owners corporation that is actively looking to rectify the causes of the claims before they become claims.

Ken Ferguson says

September 30, 2021 at 11:58 am

Good afternoon, I was wondering if you may be able to provide me with some advice?
I am an owner of one of 40 units in an 8 story building in Parramatta.
The building has had defects and caused water ingress issues for some years now.
AGM a few weeks ago and some proactive owners now pushing to get works done to address the issues,
hope to have extraordinary meeting next week to get approvals to proceed.
Problem now is insurance company did not renew insurance and it lapsed 20/9/21.
Strata Management (SM) company resigned due no insurance but still working tirelessly behind the scenes on insurance.
Most companies not interested in insuring us and SM looking overseas.
This cause me great discomfort in that the building does not have any insurance, we are working to reinstore confidence to insurers that
The issues are being dealt with and will continue to be.
Do you have any suggestions regarding insurance, what the strata committee should also be doing?
Many thanks for your consideration of the above.
Regards.

- Liza Admin says
  
  June 27, 2022 at 8:53 am
  
  Hi Ken
  
  Tyrone Shandiman, Strata Insurance Solutions has responded to your comment in this article: NSW: Q&A Obtaining Information About a Major Building Defect

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Question: I have a recurring sinkhole in my paved courtyard. The courtyard is in my lot. Am I responsible for repair costs? Does insurance cover the costs of filling a large hole every few months?

Answer: This type of event is typically excluded from most insurance policies.

Question: A lot owner wants the OC to file an insurance claim for fire damage caused by their tenant. The OC believes it’s the owner’s responsibility. Should the OC file the claim?

Answer: As an insured party who contributes to the insurance and pays a portion of the premium, the owner has the right to claim under the policy.

Question: My property is within a strata plan in NSW. The glass shower screen in the bathroom shattered due to an impact. Will strata insurance cover the repair since the shower screen is a fixture in my townhouse?

Answer: For a claim to be successful, the damage must exceed the policy excess.

Question: My floorboards are not original and were damaged by something unrelated to strata. Why must I process the claim through strata insurance and play such a high excess?

Answer: If your contents policy contains an exclusion for items covered by another policy, the strata insurance will take precedence over your contents policy.

Strata Schemes Management Act 2015 No 50

Not covered

Question: For the past two years, we’ve been declined insurance due to the number of defects in the building. How do we know what the insurance companies see as the highest-risk defects?

Answer: Prioritise rectifying defects that pose the greatest safety risk and risk of damage to the building.

Question: Are strata schemes encountering difficulties insuring pontoons for public liability, and if yes, what alternative insurance solutions are being pursued?

Answer: We strongly advise consulting with your insurance broker to tailor advice specifically to your OC’s unique needs and circumstances.

Question: Is there any insurance available to lot owners to cover the gap between what our strata building has insured my apartment for and the actual cost of rebuilding or repairing it?

Answer: It is the responsibility of the owners corporation to insure the property for its complete replacement value, inclusive of any renovations, as stipulated by the Strata Management Act.

Question: Our strata plan does not include the structure on common property that houses our bins. Is this structure insurable if it’s not on the strata plan?

Answer: Refer to the definition of “insured property” or “building” under a strata policy to understand the nature of the cover.

Question: I am having trouble obtaining an insurance policy schedule for our strata building. The strata manager seems to think that, to understand our policy, all we need is the certificate of currency and the PDS. Should we receive a policy schedule?

Answer: The two documents we recommend you consult to understand the insurance are the policy schedule and the product disclosure statement (PDS).

Question: We have purchased an apartment and will have some renovations done before we move in. We have yet to be charged or paid any levies. Does the strata building insurance cover our property until we do?

Answer: The owner should reach out to the strata manager and ask for a copy of the certificate of currency so they can ascertain who the insurer is.

Sect 160 Owners corporation to insure building

Sect 161 Requirements for damage policy

Question: The final defects report hasn’t been submitted for our new Sydney building. We have no serious defects. Without the report, it is difficult to obtain insurance quotes. What do we do?

Answer: Request a short-termed policy (3 or 6 months) and approach insurers again after receiving the final defects report.

Question: Two owners in our townhouse complete have recently made water damage claims resulting from their negligence. Why is this allowed?

Answer: When you own a property in a strata building, you become part of the collective claims history of that building.

Question: Due to recent storm damage claims, our building narrowly missed being classified as a risky building. To avoid future claims, can we insist lot owners replace old and fraying hoses within their lot?

Answer: To my knowledge, the committee does not have the power to force a lot owner to maintain their property, but they can compel them to do so.

Question: Due to our roof surface, our solar panels are installed using weighs rather than nuts and bolts. Should our insurance company be informed of this to avoid confusion in the event of an insurance claim being made if the installation is damaged?

Answer: You need to tell the insurer anything that may increase the risk to them.

Question: Due to delays in correspondence between the broker and strata manager, our insurance policy expired before we renewed. What issues do we need to be concerned about?

Answer: As the owners corporation has a duty to have insurance in place at all times, I would recommend you ask the broker to confirm cover is in place as soon as possible.

Question: If a visitor parked on common property and damaged a tap/pipe by hitting it with his car, who is responsible for the cost of the plumbing repair?

Answer: Whether accidental or intentional, damage to property is the responsibility of the person who caused it.

Question: Around 70% of apartments in our strata plan are holiday lets. Can we introduce a bylaw stating all landlords must have landlord insurance? Will this protect the owners corporation from third party liability claims?

Answer: I do not believe the owners corporation has the jurisdiction to mandate that lot owners must take out a certain type of insurance.

Question: During a recent weather event, our basement came close to flooding. If we install temporary flood barriers for future events, would the OC be liable for any damages despite our attempts to prevent flooding?

Answer: These decisions, as shown, are not ones of ‘set and forget’. They will require constant review based on what is happening at the time and what emergency advice was given by the authorities.

Question: Our duplex was damaged beyond repair. Our insurer insists on paying funds into a joint account and the other owner will not allow me access to the funds to pay out my mortgage on the property. Can the insurer pay the settlement directly to lot owners?

Answer: Insurers will only make payments for claims settlements into an account of the Owners Corporation.

Question: Are there insurance options that cover additions to a strata lot that have been approved and completed under a by-law?

Answer: Between the strata insurance and contents insurance, all domestic items should be covered in the property.

Question: Does contents insurance cover porcelain floor tiles fixed to the floor?

Answer: Strata insurance policies cover all permanent fixtures including permanent flooring.

Question: If an owner damages his garage door not once but 3 times by driving into the door, who is liable for a claim to have it replaced?

Answer: The garage door forms part of an insurance policy that the owner is an insured party to.

Question: I’m a commercial tenant in a strata property with street frontage. Am I required to insure the glass for breakage if it is already covered under the strata insurance?

Answer: To avoid an issue where the tenant has an uninsured loss, landlords may from time to time require that the tenant also holds glass insurance cover.

Question: Our committee has not repaired water ingress from a balcony into garages for well over a year. Are the committee members who neglected to repair the leaks over this considerable period financially responsible for resulting repairs?

Answer: You may find that the insurer may not cover any extra damage that has occurred since the Owners Corporation have been aware and not fixed the source of the leak.

Question: The ceiling in my top floor unit is damaged. Who is responsible and what can I do to resolve this situation?

Answer: If the strata insurer does not provide cover we recommend you request a denial letter from your strata insurer and then send this to your content’s insurer for consideration.

Question: Whose insurance covers internal walls and built-in furniture in a strata apartment?

Answer: Furniture which is permanently affixed to the building and cannot be removed at the end of occupancy can be considered by strata insurance.

Question: What can we do if, due to our claims history, we are unable to get strata insurance?

Answer: Where a building shows a consistent history of claims, insurers will usually apply hefty excesses or exclusions for the problem claims.

Question: There seems to be a growing trend of developers building townhouse schemes where the total structure is a lot owner’s responsibility. How does the Owners Corporation insure common property, as it’s not common property but lot property?

Answer: The owners corporation must insure property defined as building in the Strata Management Act.

Question: Do I need common building insurance for my detached Duplex?

Answer: In some cases, there may be not requirement for common building insurance.

Question: Can the Strata Plan secure more than one broker’s quotes for our Strata Plan’s annual Insurance Coverage? Our broker advised us that we can only go through one broker. Is this true or false?

Answer: That’s not correct.

Question: In my experience, quantity surveyors overvalue the building insurance valuation and engaging a valuer experienced in building insurance valuations is best. Is this correct?

Answer: I would recommend using a quantity surveyor, and I know that there are a lot of valuers out there that are not qualified quantity surveyors.

Australian Institute of Quantity Surveyors

Question: Do we need to inform our insurer about installing ceiling insulation batts in our roof cavity where there are many cables?

Answer: There’s no specific requirement that you must notify the insurer every time you do something to the building.

Question: If there is no owners corporation in a NSW Duplex and both lot owners only pay the annual strata insurance premium, are both lot owners legally and fully covered by the policy?

Answer: If it’s a strata policy with an Australian insurer, generally their policy wordings will comply with the act

Question: The Risk associated with Flooding, earthquake etc are rated as extremely low and, from a statistics viewpoint, unlikely to happen. Does the insurance industry rate our area as per a group of postcodes?

Answer: Insurers don’t just rate on postcode.

Question: Does strata insurance cover public liability for parking bollards installed on non-common areas, ie they are on strata title. Also, does it cover public liability for private skip bins and other gear that is kept on strata title parking lots?

Answer: Cover under a public liability policy is subject to the terms, conditions and exclusions that apply at the time after the insurers assessment of the claim.

Question: A motorcycle was stolen from common property. Would this be covered under the Strata’s insurance as it was parked on common property?

Answer: The only way a claim for a stolen motorcycle to be considered under strata insurance is a public liability claim made against the owners corporation.

Question: We run a SEPP 55, over 55’s independent living strata titled retirement village with 104 properties. Do we need special property insurance because we are a retirement village?

Answer: It can sometimes be more appropriate to insure under a strata policy, but it can sometimes be more appropriate to not.