This article is about the strata insurance dispute resolution process.
Table of Contents:
- QUESTION: Can the committee be held accountable for providing an untrue report for insurance renewal? What can owners do to prevent this from happening?
- QUESTION: We had the unit plan revalued for insurance purposes. The official valuation was lower than the value the complex had been insured for. How can the owners corporation ensure we are insured for the “correct” amount?
- QUESTION: What are the dangers of underinsurance? This is particularly relevant in the current climate where valuations are rapidly skyrocketing.
Question: Can the committee be held accountable for providing an untrue report for insurance renewal? What can owners do to prevent this from happening?
Answer: Make sure the committee is not coming up with that figure themselves.
The most important thing here is to ensure the committee is not coming up with that figure themselves. The committee could be liable if they’ve come up with that figure themselves.
It’s important to engage an independent professional to come up with that figure. Also, ensuring the professional has suitable professional indemnity insurance is important. That way, even if their assessment comes up and you are underinsured, at least you are covered by that professional indemnity insurance in the worst case scenario.
Zac Gleeson GQS E: zac@gqs.com.au P: 0419 755 896
This post appears in the February 2024 edition of The NSW Strata Magazine.
Question: We had the unit plan revalued for insurance purposes. The official valuation was lower than the value the complex had been insured for. How can the owners corporation ensure we are insured for the “correct” amount?
In 2020, in response to an owner’s questions about the cost of insurance and the EC’s subsequent investigation into insurance prices, we had our group of Class B townhouses in the ACT revalued for insurance purposes.
Surprisingly, the official valuation was some $5,000 lower than the value the complex had been insured for. After careful consideration and some back and forth with the strata manager and the insurance agent, the owners corporation opted to accept the new, lower valuation for insurance purposes.
What if we were to find out the valuation was too low? Do we have any come-back on the company’s professional indemnity insurance? How can the owners corporation ensure we are insured for the “correct” valuation?
Answer: It is not an infrequent occurrence for a valuation to yield a figure lower than the current insured value.
Quantity Surveyors are professionals that provide Insurance Rebuild Valuations. Owners corporations rely on these professionals for precise valuation assessments.
It is not an infrequent occurrence for a valuation to yield a figure lower than the current insured value. This is due to insurers incorporating automatic indexation during each renewal, occasionally causing the indexed sum insured to surpass the value derived from a fresh rebuild valuation.
In the unfortunate event of a property’s complete loss and subsequent underinsurance, the Owners Corporation may have the option to pursue legal recourse against the Quantity Surveyor, citing an undervalued rebuild valuation. Legal advice is recommended in such instances based on the specifics of the issue. Quantity Surveyors should have professional indemnity cover to cover the cost of defending and settling claims associated with erroneous or negligent advice given.
This information is of a general nature only and neither represents nor is intended to be personal advice on any particular matter.
Tyrone Shandiman Strata Insurance Solutions E: tshandiman@iaa.net.au P: 1300 554 165
This information is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. Shandit Pty Ltd T/as Strata Insurance Solutions strongly suggests that no person should act specifically on the basis of the information in this document, but should obtain appropriate professional advice based on their own personal circumstances. Shandit Pty Ltd T/As Strata Insurance Solutions is a Corporate Authorised Representative (No. 404246) of Insurance Advisenent Australia AFSL No 240549, ABN 15 003 886 687.
This post appears in Strata News #661.
Question: What are the dangers of underinsurance? This is particularly relevant in the current climate where valuations are rapidly skyrocketing.
Answer: The danger of underinsuring is that you will have a major or total loss and not be covered.
There are a couple of dangers with under insurance. First and foremost, by law, you must ensure your building for full replacement value in every state and territory in Australia. Failing to do so can result in fines and penalties for the owners corporation.
I’ve seen a building that didn’t get a valuation every five years and was underinsured and it was a total loss. In the event of a total loss, unfortunately, the body corporate or owners corporation has to make up the losses for that claim. The danger of underinsuring is that you will have a major or total loss and not be covered.
Most property policies have a clause that says if your insurance value is 80 percent or below what it should be, the insurance company will only pay a portion of that claim if it’s a partial loss. With strata Insurance, because you’re required to insure for full replacement value, that clause is not part of the policy.
Tyrone Shandiman Strata Insurance Solutions E: tshandiman@iaa.net.au P: 07 3899 5129
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 July 2023 edition of The NSW Strata Magazine.
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