Strata building insurance is one of the most commonly overlooked elements of a strata building, for many different reasons. one of those areas of oversight is the insurance excess or also called the deductible.

Insurance excess is one of the areas in strata where commonsense fails to exist, now I’m sure that everyone understands and expects that the strata insurance covers owners for some parts of their unit referenced as fixtures and fittings, this includes areas such as the toilet, shower screen, or kitchen.

WHAT IS A FIXTURE? At its most basic level, a fixture is something that is attached to the apartment in such a manner that it becomes part of the apartment. Therefore, when apartment is sold, the title to the apartment will also include all fixtures.

But the application of commonsense when allocating the insurance excess would be a wrong move. The insurance excess for a strata policy is payable by the owners corporation even if the insurance claim is specifically for a fixture or fitting within a single unit and the owners corporation was not at any fault in the damage occurring.

But why is Strata paying the excess?

Because the strata policy is in the name of the owners corporation while everybody covered by the policy is able to lodge a claim the owners corporation is the legal entity who is liable to pay the insurance excess, and the owners corporation cannot restrict an owners legal right to lodge an insurance claim.

Unlike other states within the country on-charging of the insurance excess to individual owners is not captured within the strata legislation of New South Wales or the strata regulations New South Wales.

A possible solution

Although there is a possible and simple solution that every building should consider including within the next general meeting as a matter of high priority.

That is an insurance excess allocation by law as you can see in the draft by-law below the excess is allocated to the claiming or at-fault party when known, this doesn’t restrict anyone’s rights to claim it just defines how the owners corporation will allocate the cost.

General Meeting Motion

The Owners – Strata Plan No. [SP#XXXXX] SPECIALLY RESOLVE:

  1. pursuant to the Strata Schemes Management Act 2015 (“the Act”) to make a by-law on the following terms, and
  2. that notification of this change to the by-laws be lodged for registration in accordance with section 141 of the Act at the Registrar-General’s Office:

By-Law Insurance Excess

If a claim is lodged on the Owners Corporation policy the excess is attributed as follows:
(a) If the payment of claim benefits a single lot, by the owner who is benefited
(b) If the claim’s source is within an apartment, and something that is the owners responsibility to repair and maintain, by the owner of the lot where the claim started (eg broker tap that floods several apartments)
(c) Where there source of the claim is unknown or is common property, by the owners corporation

The information contained in this post is general information only and not legal advice in anyway.