With new and significant changes made to the Owners Corporation Act, which came into effect on 1 December 2021, both owner’s corporations and lot owners need to ensure they are aware of their rights and obligations in relation to the various types of insurance available to protect their interests. Several steps can be taken by lot owners and owner’s corporations to minimise claims and in turn, reduce insurance premiums.
You can read more about the 2021 changes to the Act in our article, “Effect of owner’s corporation changes on residents' insurance”.
Measures to minimise insurance claims by owner’s corporations and/or lot owners
We recommend you use the below checklist to help owner’s corporations and/or individual lot owners both reduce the potential for insurance claims and reduce the premiums paid on insurance policies.
- Take out lot owners’ contents insurance or (where applicable) landlord’s insurance.
- Owner’s corporation insurance claims to be vetted by owner’s corporation managers.
- Owner’s corporation managers to provide monthly claims updates for owner’s corporation insurers and committees of management.
- Committees of management decide either to approve claims or to pay using the reserve fund.
- All stakeholders should work together to prevent water damage.
- Owner’s corporations could subsidise installing automatic water-flow control safety shut-off valves on mains water supply lines for all private lots.
- Residents should regularly check flexi-hoses and replace them at least every 3 years.
- Residents should regularly check and service hydronic heating (and cap unused pipes).
- Residents must check internal fire alarms and replace if required.
- Keep guttering clean.
- Repair, replace and modify inadequate guttering and downpipes.
- Increasing water damage insurance claim excess figure will help reduce premiums.
- Owner’s corporations should obtain insurance valuations of all buildings at least once every 5 years.
- Owner’s corporations should educate and support all current and new lot owners by preparing pamphlets and/or posting on the owner’s corporation website, guidance on the following:
- Lot owner contents and chattels insurance cover.
- Landlord insurance cover.
- Maintaining private plumbing and electrical works.
- Replacing flexi hoses older than 3 years old.
- Replacing internal fire alarms older than 10 years old.
- Installing automatic water-flow control safety shut-off valves on main water supply lines for private lots.
- Giving notice for how Committees of Management will deal with repairs and maintenance claims for common property and private lots.
Owner’s corporation notifications to their insurers
It is good practice for owner’s corporations to keep their insurers informed of anything that may affect their insurance cover and/or premiums and to be proactive in managing the insurance policies they have in place. This could include:
- Notifying the insurers that the owner’s corporation:
- provides funds and administration budget lines to deal with minor claims against insurance cover;
- fully complies with owner’s corporation insurer’s risk reports and recommended actions; and
- continually assesses funds for general administrative maintenance and long-term maintenance to mitigate against potential claims.
- Asking the insurers for assistance on:
- further mitigating risks and seeking advice over and above the adopted strategy; and
- providing policy discounts over the longer term for effective proactive measures.
- Sending “Invitations to Submit Conceptual Tenders” to insurance providers for premium quotes long before insurance policy renewal dates.
Owner’s corporation maintenance plans
Owner’s corporations should ensure they manage the maintenance and repair requirements for the common areas of the property. Tips for doing this include:
- updating maintenance plans and “maintenance and repairs programs”; and
- advising owner’s corporation insurers of the plan and steps to reduce insurance premiums with the maintenance budget allowing for future repairs and replacement of common property.
The role of finance sub-committees is crucial in ensuring the insurance you have in place is appropriate for your needs and is managed properly. Finance sub-committees can consider:
- setting aside funds each year to pay for what would otherwise be owner’s corporation insurance policy claims;
- raising special levies when needed;
- calculating benefit principle claims using “the Grundl Assessment”;
- using the benefit principle to on-charge annual fees for lot owners;
- levying fees against lot owners:
- for excess amounts or increased premiums because of claims caused by culpable or wilful acts or gross negligence of residents, their tenants or their guests; and
- for common property damage caused by residents, their tenants or their guests where damage:
(a) is not covered by insurance; or
(b) the costs of repairing the damage will be less than the excess payable.
Get help from a property lawyer
At David Davis, we have significant expertise and experience with owner’s corporation (previously body corporate) related to insurance liability and claims.
If an owner’s corporation is having a dispute with an insurance company or a lot owner is in dispute with their owner’s corporation in relation to liability for damage to individual property or common property, we can provide you with advice and/or assistance.