The best practice for strata insurance and claims handling 4 august 2011

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The best practice for strata insurance and claims handling 4 august 2011

  1. 1. The  Best  Prac<ce  for  Strata  Insurance  and  Claims  Handling  Webinar,  4  August  2011   ©  Copyright  2011  Teys  Lawyers                  www.teyslawyers.com.au  
  2. 2. Imagine  ‘ratemystratalaws.com’   %   80   70   Strata  Insurance   60   50   40   30   20   10   0   ACT   QLD   NSW   VIC  Compara<ve  study  of  key  features  of  strata  insurance  legisla<on  -­‐  TEYS  Lawyers    May  2011   ©  Copyright  2011  Teys  Lawyers                  www.teyslawyers.com.au  
  3. 3. Features  of  effec<ve  insurance  schemes   Responsibility   Func<onality   Clarity   Equity   Transparency  ©  Copyright  2011  Teys  Lawyers                  www.teyslawyers.com.au  
  4. 4. Developers’  responsibili<es  Legisla(ve  Provision   ACT   QLD   NSW   VIC  Developer  effects  insurances  upon  establishment                      Developer  tables  policies  at  first  AGM                       ©  Copyright  2011  Teys  Lawyers                  www.teyslawyers.com.au  
  5. 5. ‘Clear  agreements  make  for  good  friends’   Legisla(ve  Provision   ACT   QLD   NSW   VIC   Public  liability  insurance  for  strata  managers                        Public  liability  insurance  for  OC’s                 Building  insurance  –  full  replacement  as  new                 Debris  removal  and  advisers  fees  must  be  covered                  Defines  what  lot  owners  property  is  not  covered                  Insurance  policies  include  workers  compensa<on                        Insuring  with  excess  is  permissible                        ©  Copyright  2011  Teys  Lawyers                  www.teyslawyers.com.au  
  6. 6. Measures  for  improving  transparency  Legisla(ve  Provision   ACT   QLD   NSW   VIC  Insurance  details  disclosed  on  pre-­‐purchase  cer<ficate                       Insurance,  policies,  minutes,  receipts  disclosed  on                inspec<ng  records  Annual  general  mee<ng  papers  disclose  insurance                       arrangements  Strata  roll  discloses  insurance  par<culars                     ©  Copyright  2011  Teys  Lawyers                  www.teyslawyers.com.au  
  7. 7. Members  equity  is  important  Legisla(ve  Provision   ACT   QLD   NSW   VIC  Premium  contribu<ons  adjustable  for  different  fit-­‐out                       and  use  Owners  must  no<fy  of  improvements                         Clear  rules  for  determining  who  pays  excess  (if  any)                       Owners  must  no<fy  change  of  use  effec<ng  premium                      ©  Copyright  2011  Teys  Lawyers                  www.teyslawyers.com.au  
  8. 8. Enhancing  ongoing  func<onality  Legisla(ve  Provision   ACT   QLD   NSW   VIC  Government  approved  insurers                         Best  available  policies  sa<sfy  legal  requirements                       Opt-­‐in  voluntary  schemes  for  stand  alone  buildings                       Reinstatement  process  conducted  under  court  order                     Building  replacement  valua<on  obtained  at  least  each  5                 years  Owners  protected  individually  from  suit  by  insurers                        ©  Copyright  2011  Teys  Lawyers                  www.teyslawyers.com.au  
  9. 9. The  devil  is  always  in  the  detail  Current  Strata  Law  –  Building  Insurance   Typical  Strata  Policy  Insure  for  as  new  replacement  value   As  new  replacement  value  less  excess  Insure  all  buildings   •  Buildings  exclude  retaining  walls   damaged  by  storm  or  rain   •  Building  damage  caused  by  lack  of   maintenance   •  Buildings  damaged  by  non-­‐rec<fica<on   of  defects  Insure  all  site  improvements   Landscaping  excluded   ©  Copyright  2011  Teys  Lawyers                  www.teyslawyers.com.au  
  10. 10. More  devil,  more  detail  Current  Strata  Law  –  Public  Liability   Typical  Strata  Policy  $10M  public  liability  insurance   $10M  less  excess  All  events  on  common  property   •  Excludes  injury  or  damage  caused  by   animals  on  common  property   •  Excludes  loss  from  construc<on,   altera<ons  or  addi<ons  in  excess  of   $500K  without  wrihen  consent   ©  Copyright  2011  Teys  Lawyers                  www.teyslawyers.com.au  
  11. 11. A  word  on  excesses  Policies  with  an  excess  are  in  breach  of  strata  laws  except  Qld  which  are  absolute  as  to  required  cover  save  for  Qld  •  If  common  property  causes   lot  property  damage,  the  OC   must  pay  the  excess  •  If  lot  property  causes   damage,  the  OC  must  s<ll   pay  the  excess  because  of   breach  of  absolute  duty  to   insure     ©  Copyright  2011  Teys  Lawyers                  www.teyslawyers.com.au  
  12. 12. Solu<ons  for  this  insurance  dilemma   Government   insurance   Qualify  insurance   scheme   requirements   (QLD  model)  ©  Copyright  2011  Teys  Lawyers                  www.teyslawyers.com.au  
  13. 13. How  it  usually  happens   Lot  owner   loss   OC  insurer   Lot  owner   claim  made   unsa<sfied     OC  insurer   Lot  owner   says  ‘no’   bears  loss  ©  Copyright  2011  Teys  Lawyers                  www.teyslawyers.com.au  
  14. 14. How  it  some<mes  happens   Lot  owner   Lot  owner  pays   Lot  owner  loss   par<ally   excess     sa<sfied   OC  insurer   Lot  owner   claim  made   insurer  pays   Lot  owner   OC  insurer  says   claims  on  own   ‘no’   policy  ©  Copyright  2011  Teys  Lawyers                  www.teyslawyers.com.au  
  15. 15. How  it  should  happen   Lot  owner   loss   Insurer   OC  insurer   Lot  owner   rejects  claim   claim  made   sa<sfied   OC  pays  lot   Insurer   OC  pays   owner   accepts  claim   excess   sa<sfied  ©  Copyright  2011  Teys  Lawyers                  www.teyslawyers.com.au  
  16. 16. Self  help  for  all  unit  owners  Legisla(ve  Shortcomings   Owners  Corpora(on  Ac(on  No  compulsory  cover  for  debris  removal   Take  out  cover  (rou<nely  done)  and  advisers  fees  No  defini<on  of  lot  owner’s  contents  not   Advise  owners  of  excluded  lot  owner’s  covered   contents  from  policy  wording  No  AGM  disclosure  of  insurance   Voluntarily  disclose  insurance  arrangements   arrangements  at  each  AGM  No  compulsory  replacement  valua<on   Voluntarily  obtain  a  replacement  required  at  least  each  5  years   valua<on  at  least  each  5  years  and  insure   accordingly  No  requirement  for  no<fica<on  of  owners   Amend  by-­‐laws  to  require  no<ce  improvements  and  change  of  use  No  rules  for  determining  who  pays  excess   Amend  by-­‐laws  to  include  rules  (bluff?)  No  disclosure  of  insurance  on  register   Voluntarily  disclose  details  on  register  No  requirement  to  include  workers  comp   Take  out  cover  (rou<nely  done)   ©  Copyright  2011  Teys  Lawyers                  www.teyslawyers.com.au  
  17. 17. Where  the  government  must  help  Legisla(ve  Shortcomings   Law  Reform  Ac(on  Required  cover  not  available   Relax  requirements  or  provide   government  insurance  No  requirement  for  developers  to  effect   Clarify  developers’  obliga<ons  insurances  upon  establishment  of  OC  No  recogni<on  of  excesses   Permit  excesses  or  provide  government   insurance  No  opt-­‐in  voluntary  scheme  for  stand   Create  opt-­‐in  scheme    alone  buildings  No  government  approved  insurers   Approved  insurers  No  owner  protec<on  from  subroga<on   Protect  owners  from  subroga<on   ©  Copyright  2011  Teys  Lawyers                  www.teyslawyers.com.au  
  18. 18. Join  our  next  webinar  Join  us  for  our  next  webinar  at  4.00pm  on  1  September  2011  ‘Who’s  Responsible  For  These  Defects  And  How  Do  I  Get  Them  To  Pay?’  Reserve  your  seat  now  at:  hhps://www3.gotomee<ng.com/register/127376206  ©  Copyright  2011  Teys  Lawyers                  www.teyslawyers.com.au  
  19. 19. About  the  presenter   Michael   Teys   is   the   Founder   and   Principal   Lawyer   of   TEYS   Lawyers.  He  has  a  Bachelor  of  Laws  and  prac<ces  exclusively  in   the   area   of   strata   <tle   law.   He   is   a   Fellow   of   the   Australian   College  of  Community  Associa<on  Lawyers.  He  was  formerly  an   Adjunct   Lecturer   with   Charles   Sturt   University.   He   appears   weekly   on   SKY   News   Business   Channels   Property   Success   with   Margaret   Lomas   and   is   a   regular   panellist   for   the   property   edi<on  of  Your  Money,  Your  Call  for  the  same  channel.  You  can   find  out  more  about  Michael  at  www.michaelteys.com  TEYS   Lawyers   prac<ce   na<onally   in   strata   <tle   law   represen<ng   owners  corpora<ons,  bodies  corporate  and  apartment  owners.    The  firm’s  prac<ce  groups  include   building   defects,   management   rights,   strata   community   disputes,   by-­‐laws  and  rules  and  levy  and  fee  collec<on.  Subscribe  for  their  free  e-­‐newsleher  StrataSpace  and  find  out  more  about  them  at  www.teyslawyers.com.au  ©  Copyright  2011  Teys  Lawyers                  www.teyslawyers.com.au  

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