Insurance – Tracsafe

March 2019 – Ownership, maintenance and insurance

trkwpbcm — Fri, 01 Mar 2019 09:22:55 +0000

A very important concept is to realise that the BCCM legislation complicates whether the body corporate or lot owner should be attributed the ownership, maintenance or insurance responsibility for specific infrastructure. Let’s go through a couple of examples that are relevant for schemes surveyed as building format plan.

Take airconditioning. In the case of an air-conditioning system dedicated to one lot – the external condenser unit and cabling will usually be common property and owned by the body corporate whilst the internal unit is owned by the lot owner. The maintenance of both the internal and external units are a lot owner responsibility. The insurance on the whole system is usually a lot owner contents responsibility (check the specific policy terms of the body corporate building policy to be sure).

Take guttering and drainpipes. The guttering and drainpipes will be common property and owned by the body corporate. Maintenance will be a body corporate responsibility unless the guttering and drainpipes only service one lot. In a dedicated lot situation, the lot owner would be responsible up to the point where the drainpipe converges on a common drain point. The insurance responsibility is solely the body corporate although an excess might be payable by the lot owner if the insurance event is purely related to the lot.

It can be complicated. Tracsafe can help.

November 2018 – Insurers have a lot of power

trkwpbcm — Wed, 28 Nov 2018 07:55:37 +0000

A recent storm on the Gold coast affected one of the schemes that we manage. There was water damage to two lots after severe hail cracked and lifted tiles above their townhouses. The scheme is on a building format plan of survey so the impact to the roofing above the two lots was a body corporate responsibility. The insurer’s panel repairer did a make safe and prepared an expert’s report. In that report, it was stated – ‘Cracking to ridge cap pointing to lower and upper roofs evident’. Additionally, they noted that ‘The above repairs should be completed by a qualified trade prior to insurance related works commencing.’ They formed the view that this component of the overall damage was due to overdue maintenance and not a consequence of the storm.

The insurer has approved the repairs for the consequential damage from the storm. However, this will not commence until the Body Corporate provides evidence that the maintenance issue has been corrected. A quote provided by a related party to the panel repairer was $11,000. An EGM is required to approve a quote of that nature and additionally two quotes are required and a lengthy process to run an EGM in accordance with the legislation. Repairers are hard to source because there are many properties needing repair in the area. A second quote has been sourced. A third contractor contradicted the expert’s report but unless the original expert withdraws their report commentary regarding the pointing, the insurer is unlikely to change their position.

A small body corporate does not have the time or money to invest in challenging expert’s reports, nor getting the insurer to modify their position. Insurers have a lot of power! Meanwhile the impacted lot owners worry whilst their lots remain unrepaired and the storm season continues.

August 2018 – Home office and body corporate insurance

trkwpbcm — Thu, 02 Aug 2018 16:03:38 +0000

Committees are often concerned about the impact of a lot occupier’s home office in a residential complex. There are relevant BCCM adjudications that have upheld the use of a home office providing all by-laws are being respected (such as not causing a nuisance). Different councils have different rules about whether approval of the office is required. Generally, councils permit operators to self assess whether approval is required. For typical paper based home offices, self assessment will usually identify that approval is not required.

An additional concern for a committee will be the impact of the home business to the public liability insurance of the body corporate. The Act requires public risk insurance to be at least $10 million for the common property covering both person and property. All strata policies have exclusions such as not paying claims arising under the policy unless liability would have attached to You in the absence of such a policy. So if a lot occupier has a home based bicycle refurbishment business, and someone is test riding a push bike on common property, gets their shoe lace caught in the wheel, falls off and severely injured themselves, the body corporate insurer will deny the claim.

If the home business operator has public risk insurance then the body corporate can breathe more easily. However, if the home operator does not, it is fairly likely that court action may ensue and the body corporate will be implicated in the action (because that’s what the lawyers will do) Hopefully, the body corporate will not be out of pocket and the end of the day .. but who can say .. and who wants that angst.

What can the body corporate do? If the committee perceives that there is an increased risk of liability, then they are required to inform their insurer. Without any other action, the insurer could respond by cancelling the policy. In this specific example, the committee could consider introducing a by-law that prohibits riding of bicycles on common property. This will help to mitigate the risk. However, a by-law must not discriminate between types of occupiers so the prohibition will need to apply to all users of the common property.

Another possibility is introducing a by-law that requires the owner or occupier to maintain public risk insurance if they are conducting a home business. However, adjudication decisions have been very clear that such a by-law would be invalid as it imposes a monetary liability.

The solution is to create a by-law that requires a lot owner or lot occupier to gain committee consent in order to use their lot for any other purpose than a residential purpose. The committee can then consider applications and impose reasonable conditions. In the example described in this post, they would reasonably be able to impose a condition that relevant public risk insurance of at least $10 million covering both property and person be obtained annually and certificates of insurance be forwarded to the Secretary.

Insurance valuation

trkwpbcm — Sat, 25 Mar 2017 21:05:22 +0000

Cost conscious Committees may sometimes believe an insurance valuation is unnecessary or they believe their insurer is providing this valuation. The requirement under the Act states an independent insurance valuation must be undertaken once every five years. Insurance companies and insurance brokers could be considered independent, but these organisations do not furnish a Body Corporate with an independent written valuation. They are not skilled in the art of valuation.
There can be confusion for Committees because insurers usually automatically increase the ‘building sum insured’ year on year. They do this in line with one of the CPI indicators (eg. Queensland construction index). However, this should not be construed as providing a valuation. Insurance valuation is important because if a disaster does occur an accurate valuation that includes demolition and current rebuilding costs is essential.
Click through to read more in our committee advisory note.

Fire

trkwpbcm — Sat, 25 Feb 2017 21:04:04 +0000

Sadly, this month we had to deal with a devastating event when a lot in one of the Bodies Corporate that we manage burnt down. Fortunately, functioning smoke alarms alerted the occupiers to danger and the family exited quickly and safely, immediately calling the fire brigade. The family was shocked at how quickly the fire spread. The lot has had to be demolished and will be rebuilt over the next six months. Experts believe the fire sparked from a gecko caught in the air conditioning.
The aftermath has been stressful for the family as they find temporary accommodation, purchase necessities, interact with people and organisations involved in the rebuild. In a disaster like this having adequate insurance cover and an up-to-date insurance valuation is comforting. Tracsafe had ensured that the committee had addressed these issues appropriately. In this specific case, the insurance policy covers temporary rental accommodation for lot owner occupiers whilst the townhouse is being rebuilt.

Why we use an insurance broker

trkwpbcm — Sat, 26 Mar 2016 04:03:07 +0000

We recently started a new Body Corporate scheme on behalf of a developer. At the first AGM, there were many new owners who had never been part of a Body Corporate in Queensland. There was much confusion about insurance, and specifically about the insurance that a lot owner might have and the insurance that a Body Corporate might have. For example, it is possible that both the lot owner and the Body Corporate need WorkCover. Both the Body Corporate and a lot owner might have contents insurance but this coverage will be related to different assets. The insurance requirements of a lot owner who is a landlord are different from the requirements for a lot owner occupier.
Tracsafe is not an ‘Authorised Representative’ of an Australian Financial Services Licensee. Consequently, we cannot and will not provide insurance advice. We use an insurance broker to provide any advice to the Committee and we recommend that lot owners seek advise from a broker for their own insurance requirements.

Insurance denied!

trkwpbcm — Sat, 26 Dec 2015 04:04:25 +0000

We heard recently of a case where a Body Corporate on a Standard Format Plan was denied insurance. The buildings in the Body Corporate had common walls and so the insurance needed to cover the buildings as well as the common property. An insurance inspection report had uncovered deficiencies in many of the lots (related to the integrity of the balconies). The insurer advised the Body Corporate that insurance would only be renewed subject to corrective action being completed. Most of the lot owners immediately complied and rectified the issue. However, two lot owners did not. Despite letters and lawyers,
they did not comply. The insurance policy expired and the entire property is without insurance. The insurer would not re-insure and exclude the two lots. The lot owners are finally taking action but they have put the entire Body Corporate at risk and people are not happy!

The Body Corporate might have got action faster by getting a BCCM adjudication authorising the Body Corporate to act if the lotowners fail to complete by a certain date. The legislation permits the Body Corporate to act and for the cost of the work to be a debt against the lot owner. However, before breaking down doors to gain access, it is best to get an adjudication that authorises the action.

The other lesson from this story is that all Bodies Corporate needs to maintain their properties in good condition as stated in the legislation. There can be consequences … as this story shows.

Insurance confusion

trkwpbcm — Wed, 26 Aug 2015 04:10:03 +0000

In Building Format Plans, the Body Corporate is responsible to insure the buildings on scheme land. Most insurance policies include cover for anything that is ‘plumbed in’ to the building. This would include stoves, airconditioning units, solar panels, rainwater tanks. Insurance coverage addresses events such as fire, theft, motor fusion, storm and consequential damage. It does not address wear and tear! It is easy to confuse the assets that are covered by insurance with the assets that are the maintenance responsibility of the Body Corporate. They are not the same!
In Building Format Plans, the Body Corporate maintenance responsibility ends at the boundary walls to the lot. If a water pipe bursts inside the boundary wall, the Body Corporate is responsible for repair. If the water pipe bursts in the portion of the pipe protruding from the boundary wall, then the lot owner is responsible for repair. If the water pipe bursts inside an internal wall, then the lot owner is responsible for repair. In all cases, a claim on the Body Corporate insurance could be sought for any consequential damage.