Body Corporate Insurance and Making a Claim
If you own a property in a Body Corporate, you may need to make a claim on the Body Corporate’s insurance policy. In most instances, the Body Corporate’s insurance policy includes insurance for the building/s and the fixtures and fittings within each Lot. As Body Corporate Managers, Pinnacle Strata can help you with making a claim on the insurance policy for your Body Corporate. We are here to help and we will do our best to expedite your claim however, please note that we can only provide general advice, not specific advice on your circumstances or claim.
What should I do if I need to make a claim?
If you have not already done so, read the Product Disclosure Statement (PDS) for the Body Corporate’s insurance policy. It is an important document that sets out the scope of cover, policy exclusions and other relevant information. If you do not have a copy, please contact Pinnacle Strata or the Body Corporate’s insurer. The details of the Body Corporate’s insurer are included in the notice of each Annual General Meeting;
Read the PDS for the Body Corporate’s insurance policy;
Really, read the PDS for the Body Corporate’s insurance policy;
Collect as much evidence as possible that relates to the circumstances of the claim. This may include photos, statements and reports from plumbers, electricians or witnesses. If you are submitting witness statements as evidence, ensure that the statements are made as soon as possible after the insurance event. Memory can become unreliable and malleable over time;
Act prudently and take reasonable steps to mitigate further loss;
Contact Pinnacle Strata for a claim form and complete it to the best of your ability.
Why should lot owners complete the claim form if it is the Body Corporate’s insurance?
It is important to distinguish between ownership and the responsibility to insure. The fixtures and fittings within your lot are your property. They are owned by you. The Body Corporate only has the obligation to insure these fixtures and fittings. You are a beneficiary to the Body Corporate’s policy and it is you that is making that claim, albeit on the Body Corporate’s policy. It is also in your best interest to make the claim and have input into the choice of repairer. After all, it is your property and you should be satisfied with the repairs.
Why should lot owners source quotations for the repairs?
As stated above, the fixtures and fittings within your lot are your property, not the property of the Body Corporate. It is in your best interests to source quotations from contractors that meet your satisfaction.
Why should lot owners pay the insurance excess?
The Body Corporate legislation provides that a lot owner is responsible for paying the excess on the policy if the insurance event is confined to their lot unless the Body Corporate determines that this is unreasonable due to the circumstances. It is important to remember that the burden to pay the excess falls on the lot owner unless the Body Corporate resolves otherwise.
Conversely, the Body Corporate is responsible for paying the excess if the claim relates to common property. This includes insurance events where an item of common property has failed (e.g. a common water pipe bursts) and causes damage to fixtures and fittings in a lot.
Who should approve the repairs/release to the insurer?
If the insurance claim is confined to a single lot, the lot owner should sign off on the repairs. This is consistent with the items above. The fixtures and fittings within your lot are your property and you should be satisfied with the repairs. If the claim is a complex claim and affects a number of lots and Common Property, the Committee should ensure that each affected lot owner confirms that they are satisfied with the repairs/compensation before releasing the insurer.
What if I want a cash settlement for my claim?
Owners may request a cash settlement for their claim but there are some important items to consider. Firstly if you do not intend to carry out the repairs, you must inform the Body Corporate. This will also be noted by the Body Corporate’s insurer. Secondly, you must sign/approve the release. If you elect to receive a cash settlement and find that the repairs cost more than you receive, you may have no right to further recovery from the Body Corporate’s insurer.
Final word on “utmost good faith”.
In Australia, insurance contracts are based on the principle of “utmost good faith”. Insurers must act with due regard to the insured's interests, even in situations where there is a conflict of interest. The duty also requires the insured (and lot owners as beneficiaries to the policy) to act honestly when dealing with the insurer. This means that you, as a lot owner, must disclose any relevant information relating to risk/s or improvements to your lot. You must also be honest when completing the details on the claim form, even if you were at fault. The insurer, in turn, must act in your best interests (within the scope of the policy), even if it is to their detriment.
Written by: Duncan Lee