Flood Insurance: Are You Covered?

In Queensland, body corporate properties are being hard hit in the recent spate of bad weather, and possibly exposing some grey areas regarding body corporate insurance cover for flood damage.

The following information provides answers to some of the most frequently asked questions relating to flood insurance cover.

Is the damage covered by insurance?

The body corporate is required to hold property insurance. However, many insurance policies do not cover flood damage. The insurance policy may also require the body corporate to take steps to minimise any damage.

Steps you should consider include:
• checking whether your insurance policy covers damage from major flood events
• contacting your insurer or broker to discuss any damage your property may have sustained
• documenting any damage including photos or videos of any damage; and
• cleaning up your property after the flood to minimise the extent of the damage.

Fine-print and Definitions:

Certain body corporate insurances may not cover flood damage from storms and rainwater runoff, which may put the property owners on the back foot when this kind of damage occurs.

Determining the cause of the flood and the nature of resulting damage can at times be tricky, and therefore owners could get locked in long, tedious insurance battles.

Pay special attention to some of the nuances such as the definition of “flood” within the policy which ideally means overflowing groundwater from lakes, rivers, dams, etc.

Who will pay when insurance does not cover flooding?

Bodies corporate and their members will need to cover the costs of restoring the scheme to a good and structurally sound condition if the damage is not covered by insurance.

In general, lot owners will need to individually cover the costs of fixing their own lot. Owners will also need to contribute, according to their lot entitlements, for the costs incurred by the body corporate in fixing areas for which the body corporate is legally responsible.

Significant differences in the extent of the body corporate responsibilities occur depending upon whether the lots are registered under a group titles plan or standard format plan or by the walls of the building (building units plan/building format plan).

If the lot boundaries are defined by the walls of the building then the body corporate is likely to be responsible for the exterior of the building and for all doors and windows in those external walls.

What if the scheme is so badly damaged it needs to be redeveloped or terminated?

All owners may enter into an agreement to allow for a scheme to be terminated or redeveloped. If there is even one owner who expresses a reasonable preference in favour of rebuilding the scheme rather than terminating the scheme then all owners must proceed to rebuild the scheme.

However, an application may be made to the District Court for a determination that the circumstances are such that it is just and equitable to terminate the scheme despite the objections of some owners.

What if I can’t pay the costs of fixing the building?

Any owners who cannot afford to fix their own lots and contribute to the costs of the body corporate fixing common property are obviously in a very difficult situation. This is especially so if these owners cannot sell their lot at a price that covers the amount they have borrowed to purchase the lot.

However, owners should consider the consequences if they are ultimately unable to meet their share of the repair costs. Lot owners may be liable for additional penalties and costs if they do not pay body corporate contributions as they fall due. Liabilities could also arise if the failure to undertake repairs contributes to further damage suffered by others.

If a property is left in a damaged state this can also jeopardize insurance cover for the complex.

How long can we take to fix our lots?

The body corporate has a statutory duty to act reasonably and perform certain maintenance duties. The body corporate will be in breach of this statutory duty if it fails to rectify maintenance problems within a reasonable time of becoming aware of the problems.

Some bodies corporate may face difficulties in obtaining qualified tradespersons to perform repairs after significant flood events. It may be prudent for individual owners to take an active interest in assisting their body corporate to fix damage as soon as possible.

This would avoid owners subsequently having to contribute to potentially substantial damages payments to anyone who suffered loss as a result of any unreasonable delay in the body corporate performing necessary repairs. Individual owners also have similar duties in respect of their own units.

Therefore, an owner would be prudent to consider whether delays in fixing their own unit will result in someone else suffering loss or damage.

What if I am suffering loss because owners are not fixing the scheme?

Individual owners and the body corporate made up of those owners have statutory maintenance duties for the scheme.

If you believe you are suffering loss because these statutory duties are not being complied with then in the first instance you should contact owners or committee members to discuss what action is proposed.

There are likely to be some steps that you can take to minimise your loss or to suggest particular maintenance actions that could be taken.

Initially, you should make an application for conciliation. If necessary, you may wish to lodge an application with the BCCM Office. You may also wish to seek independent legal advice.

 

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