Insurance


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

The OC pays the insurance excess.

This issue seems to cause significant concern to ECs and owners.

The Small Claims Court in 2007, that is before the passing of the Unit Title (Management) Act, decided this question in Blackman v UP 666

17.    The question of who pays the excess – the gravamen of this matter – is between the insurer and the Proprietors Units Plan 666. If a proprietor makes a claim, the nature of the reimbursement received by the insured being the legal person known as “Units Plan 666”, from its insurer (CHU) is irrelevant to the person lodging the claim. Absent a bylaw passed by the Proprietors Units Plan 666 placing the responsibility for such payment in a particular place, the entity Proprietors Units Plan 666 must wear the excess. It is, after all, its insurance.”

Please note that subsequent to the passage of the Unit Title (Management) Act and until a Regulation is made, OCs cannot amend their Articles or Rules or pass a motion to require owners to pay the excess.

This decision is further reinforced by the decision of the Small Claims Court in the case of Adam v CHU Underwriting also in 2007. In this case Mr Adam sought to sue CHU because he was unhappy with CHU’s decision to grant some of his claim but not the rest.

“The claim against CHU may be easily disposed of. CHU was in a contractual arrangement with Unit Plan 60. …….But this does not make Mr Adam a party to the contract between CHU and Unit Plan 60. Mr Adam’s claim against CHU must fail.”

So the individual owner is not a party to the insurance policy, which is between the OC and the insurer.

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.