Insurance

Insurance

Who should pay the insurance excess, the unit owner or the OC?

The OC pays the insurance excess.

Numerous cases were argued in ACAT over many years starting with Blackman v UP 666.  The Unit Titles (Management) Act has now been amended to state

100A                   Lodgement of insurance claims

(1)     This section applies to an insurance claim made in relation to a building on the land in relation to a units plan.
(2) The responsible entity for the units plan must—
(a)     lodge the insurance claim; and
(b)     pay any excess payable in relation to the insurance claim.
(3)     In this section:

responsible entity—see section 100 (5).

Of course, if the unit owner or occupant wilfully or negligently causes damage that results in an insurance claim, the OC can seek recompense under S31 of the UT(M)A.

31              Recovery of expenditure resulting from member or unit occupier’s fault

(1)   This section applies if an owners corporation for a units plan has in carrying out its functions incurred an expense, or carried out work, that is necessary because of—
(a)   a wilful or negligent act or omission of a member of the corporation, or an occupier of the member’s unit; or
(b)   a breach of its rules by a member of the corporation, or an occupier of the member’s unit.
(2)   The amount spent or the cost of the work is recoverable by the owners corporation from the member as a debt.
(3)   If the owners corporation recovers an amount under subsection (2) from a member for an act, omission or breach of an occupier of the member’s unit, the member may recover the amount from the occupier as a debt.
(4)   In this section:

expense, includes a reasonable legal expense reasonably incurred, including a legal expense relating to a proceeding in the ACAT.

work, carried out by an owners corporation, means maintenance or anything else the corporation is authorised under this Act to do.

Can the OC decide not to insure certain buildings or parts of the common property?

No.

In Kajula Pty Limited v UP 682, ACAT decided that the OC has no right to exempt itself from the sections of the Act (Ss99-102 of the Unit Titles (Management) Act) requiring insurance for all buildings on the parcel and public risk liability.

OCs should note that S101 allows OCs by unanimous resolution to exempt themselves from taking out insurance if the common property is less than the amount prescribed by Regulation (currently $10,000), or, again by unanimous resolution, for one year at a time if the development comprises class B units.

Can an OC refuse to pay for damages to a unit that arise from the common land or seek to limit its contribution?

No.

In Lemmon v UP 37 in 2002, the OC contended that Ms Lemmon was at fault in not taking action to protect her unit from water not flowing through blocked drains on common land.

The Small Claims Court decided that the OC’s responsibility to maintain common land is a strict liability. Owners are not responsible to make changes to their units to avoid damage that arises from the OC’s failure to do its job.

So an OC cannot shift its responsibility to maintain the common land to individual owners. The Acts say the OC is liable to maintain the common property and that effectively is the end of the argument. It is a strict liability on the OC that it cannot shift to another party.

In Kirk v UP 2992 during a protracted debate resulting from poor communication and lack of knowledge of the UT(M)A the EC concluded it could limit its contribution to the rectification of the poor construction of the balcony and the consequent internal damage of the unit.  ACAT found no justification for that position.