In matters like this, the owners corporation should seek advice from its insurer. It would be unfortunate for an insurance claim to be denied because of something as simple as failing to advise the insurer of a change of use of a lot within the scheme. The “duty of disclosure” usually requires the insured to notify the insurer of events or changes that may affect the insurance cover. Failure to do so may affect any claim.
It would be best practice to contact the insurer to clarify whether they consider the change to be significant enough to affect the premium. They may even consider that a gym does carry more risk than an accountancy practice, but not enough to impact on the insurance policy.
If the insurer does decide that the changed use of the lot will require an increased premium, the strata legislation provides that an owners corporation can seek to have the lot owner pay the additional amount. This is on the basis that the gym owner is the one who has caused the extra cost to the scheme.
Also, the strata legislation specifically provides that levies can be adjusted to charge this extra amount to an owner. Normally levies can only be paid on a unit entitlement basis which would not allow for such an adjustment.
If the new owner refuses to accept this cost, the owners corporation can take them to mediation and if necessary, seek an order from the Consumer, Trader and Tenancy Tribunal to adjust the levies to make the owner pay the increase in premium.
“One of the owners in our scheme was recently told we could cut back on insurance costs by reducing our public risk insurance. Is that right?”
The strata legislation under section 87 states that an owners corporation must take out insurance to cover damage to property, death or bodily injury for which the owners corporation could become liable in damages. The cover must be for at least $10 million for each event for which a claim can be made. It is not unusual for owners to have differing views on the amount of money they spend on their strata scheme. However, insurance is an area that can have adverse consequences if not properly maintained.
It should be kept in mind that this is mandatory insurance. The strata legislation states every owners corporation must have this cover, along with building, voluntary workers insurance and, if appropriate, workers compensation insurance. They may also choose to have additional cover for anything else they consider necessary. It is advisable to check the strata scheme’s insurance policies, because many insurers bundle this cover in with the building cover, so it is already included in the one premium.
This cover is often mistakenly referred to as “public risk insurance”, but it is intended to be more than that. The strata legislation intends for owners and occupiers to be insured, as well as the public. This is because owners or occupiers may be more likely to be injured in an event than a member of the public. Many policies only cover the public.
For instance, if a common property tree falls on an owner and her car, and also lands on the public footpath hitting a man walking his dog, the intention is that the owners corporation is insured for liability arising from any of these injuries or damages.
It is also important for the owners corporation to be clear on whether they have cover to a limit of $10 million for one or more events arising from one incident (many strata policies have this clause), or $10 million for each event. The first one provides a maximum total payout of $10 million, not $10 million per person. If a balcony in the strata scheme was to collapse and 15 people were killed and injured, the owners corporation could easily be faced with claims mounting to well over $10 million. The owners do not want to find themselves liable for a bankrupting damages claim.
“There has been a spate of robberies in our area recently. The thieves have been targeting large household items like outdoor tables and chairs, indoor lounge suites and even blinds and bedding. I live in a ten lot scheme and we all decided recently to build a common property cabana next to our swimming pool. We had it fitted out with cooking facilities, plates and cutlery, blinds and chairs. Would these contents be covered under our strata building insurance if anything was stolen?”
The owners corporation needs to check its insurance policy and if in any doubt, call its insurer. Most building policies outline the type of contents that will be covered for theft, but there is a duty of disclosure that makes it the responsibility of the insured to advise the insurer of any changes to common property that may impact on the policy.
Whether the new cabana and its contents require disclosure is something the owners corporation should discuss with its insurer. If there is a failure to disclose, the insurer may deny the claim.
One would not normally expect a newly fitted out cabana to be raided and stripped of all its fittings. However, stranger things have happened. NSW Fair Trading has heard of an instance in a large scheme where, on one bright sunny mid-week morning, workmen arrived and began work on the common property copper gutters and downpipes. A couple of people noticed and thought some maintenance was underway.
That afternoon an owner returned home to find the entire plumbing fitout removed. Every single copper gutter, downpipe and fitting had been stolen. A couple of pvc fixtures were untouched. Fortunately, the insurer did come to the party, but it is an example of how things can unexpectedly go very wrong indeed. – See more at: http://www.stratavoice.com.au/blog/maintenance/19-strata-unit-owners-forum/#sthash.34D3UsA1.dpuf
