25 Sep Who is liable for the excess on insurance claims?
Who is liable for the excess on insurance claims?
We have, in the past, provided information on Insurance – whether it is renewals, how to lodge a claim and who is liable for the excess in the event of a claim, however with CHU providing the sponsors article this month on water damage caused by flexible braided hoses, we felt it timely to rehash who is responsible for the excess in the event that a claim is made, particularly if the insurer has a separate (often costly) excess for water damage claims.
To take a slight step sideways – we know under section 178 of the Body Corporate and Community Management (Standard Module) Regulation 2008 (Section 176 & 177 of the Accommodation Module) the Body Corporate must insure, for full replacement value the Common Property and the Body Corporate Assets. This may (and usually does) involve insuring on the basis that an excess is payable on the happening of an event for which the insurance gives cover.
In this month’s adjudicators order, the applicant sought a ruling that the Body Corporate acted unreasonably in making them pay the excess on a water damage claim of $20,000 and that the Body Corporate be ordered to reimburse the applicant for the $20,000 or the lesser amount of $15,000.
There are 2 parts to this application that could be reviewed – the claim that the Body Corporate was unreasonable in its decision to make the applicant pay the excess on the claim & how the Body Corporate came to the decision that the excess was the responsibility of the applicant. In this article, we focus on the excess and how the Body Corporate made this decision. Whether the Body Corporate was reasonable in its decision is an article for another day.
Section 184(3) & (4) of the Body Corporate and Community Management (Standard Module) Regulation 2008 states:
(3) For an event affecting only 1 lot, the owner of the lot is liable to pay the excess unless the body corporate decides it is unreasonable in all the circumstances for the owner to bear the liability.
If a shower screen is damaged in a lot and an insurance claim is made under the body corporate’s reinstatement insurance, the owner of the lot would be liable under subsection (3) to pay the excess unless the body corporate decides it is unreasonable for the owner to be required to pay it. However, if there is a fire within a lot caused by a short circuit in electrical wiring located in an internal partition, the body corporate might decide it would be unreasonable for the owner to be required to pay the excess.
(4) For an event affecting 2 or more lots, or 1 or more lots and common property, the body corporate is liable to pay the excess unless the body corporate decides it is reasonable in all the circumstances for the excess to be paid for by the owner of a particular lot or to be shared between owners of particular lots, or between the owner of a lot and the body corporate, or between owners of particular lots and the body corporate.
In this instance, the water damage occurred as a result of a faulty mixer tap – which is the responsibility of the lot owner (the applicant) to maintain. It is also confirmed that the applicant’s lot was the only lot affected by the event, so this falls under Section 2 of the above-mentioned legislation.
The argument from the applicant, among various other points raised, was that at the time the event occurred, they were not notified about the extreme change in policy, however the Adjudicator ruled that this fact alone does not establish unreasonableness and as a result of this (and many other reasons) the outcome sought by the applicant was dismissed.