What is an Excess in Insurance?
The body corporate can decide to take out an insurance policy where an excess has to be paid on an insurance claim. An excess is an amount of money paid (by the body corporate or an owner) towards a claim you make on the insurance policy.
Who Pays the Excess?
Who pays the excess on an insurance claim depends on a number of things.
For example, if the body corporate claims on its insurance because a lot has been damaged by water from a leak in that lot, the lot owner would normally pay the excess.
The excess must not create an “unreasonable burden” on the owners of individual lots.
However, if the damage to the lot happened because the body corporate did not properly maintain the common property, it would be reasonable for the body corporate to pay the excess.
As a guide, if the event affects:
- only 1 lot—the owner should pay the excess unless the body corporate decides that it is unreasonable for them to do so
- 2 or more lots—the body corporate should pay the excess unless the body corporate decides it is reasonable for the excess to be paid by 1 or more of the affected lots
- 1 or more lots and the common property—the body corporate should pay the excess unless the body corporate decides it is reasonable for the excess to be paid by 1 or more of the affected lots.
If you feel it would be ‘unreasonable’ for you to pay the excess on a body corporate insurance claim, calmly explain to the committee your reasoning for this.
If you disagree with the committee’s decision you can lodge an application with the Office of the Commissioner for Body Corporate and Community Management, firstly for conciliation and then adjudication.
What is Reasonable?
Body corporate legislation requires a Body Corporate and the appointed Committee to ‘act reasonably’. But what is reasonable?
Unfortunately, the governing legislation does not anticipate the varying scenarios faced by a Body Corporate and its Committee.
It also sets no basis for what is considered ‘reasonable’ and what is ‘unreasonable’ when making a decision.
To help your Committee make ‘reasonable’ decisions when considering a matter, controversial or otherwise, we have provided the below tips.
- The Committee have gathered as much information as possible before considering the decision
- There is a reasonable basis for the decision, supported by evidence and in many cases, expert advice
- The basis of the decision is fully and accurately documented
- There is an evaluation of the facts, and circumstances surrounding the issue in question
- There is confidence that enough evidence has been provided to consider the matter accurately
- The decision making process has been objective, meaning that the decision was not influenced by personal feelings or opinions in considering and representing facts
- If the matter being considered requires interpretation of law or other specialised advice, seek payment of professional costs by the applicant as a condition of approval
If you have any questions related to body corporate insurance get in touch today for a friendly chat.