Strata water damage: two policies, two excesses, one leak

A house with a burst pipe produces one claim. An apartment with the same burst pipe routinely produces two, on two different policies, with two excesses, two assessors and two organisations each reasonably certain the other one should be paying.

Nothing about that is an accident or a failure. It is the structure: the owners corporation insures the building and the common property, you insure what is inside the lot, and water does not respect the boundary between them. This page is about what the federal insurance law does with that — which is a good deal more than most people are told.

Where it leaked decides whose claim it is

Strata is inside the prescribed contracts, and that matters

It would be easy to assume the consumer protections in the Insurance Contracts Regulations are for houses. They are not.

And the definition is drawn deliberately widely:

Three consequences follow immediately, and all three are things lot owners are routinely told the opposite of:

• The standard cover floor applies. The fourteen listed events in reg 19(1)(a) are the starting position for a strata building policy too — the full list is here.
• The statutory meaning of flood applies. An owners corporation policy cannot define the word down; Insurance Contracts Act 1984 (Cth) s 37B(1)–(3) settles it. The seven listed water bodies.
• The Key Facts Sheet obligations apply, which means kept on the insurer’s website, downloadable — you can read the strata insurer’s sheet without going through the strata manager at all.

The section almost no lot owner uses

Here is the situation this provision was written for. The failure was on common property. The claim belongs to the owners corporation. The strata manager is slow, or disagrees, or has fifty other lots to deal with, and your floor is still wet.

If you are named or referred to in the strata policy as someone the benefit of the cover extends to — and lot owners commonly are — you have a statutory right to recover your loss from that insurer directly. You do not have to be the one who bought the policy, and you do not have to be a party to it.

That second subsection is the practical half. You carry the same obligations you would have as the insured, and you may discharge the insured’s obligations — which is the statutory way of saying you can get on with it.

And the limit, which is real

The insurer keeps every defence it would have had against the owners corporation, including defences about the owners corporation’s own conduct, before or after the policy was taken out. So a non-disclosure or a breach at the scheme level can defeat your claim under the strata policy even though you had nothing to do with it. That is exactly why the lot owner’s own policy is not redundant, and why the sensible move is to lodge on both and let them sort out the apportionment.

If the water came from a neighbour’s lot

Then neither of your two policies is necessarily the answer — it may be a liability question against that owner, whose insurer you have no contract with. General Insurance Code of Practice, paragraph 60 is the provision to know: Where an insurer is contacted by an uninsured person who wants to claim against one of its customers, it must tell them about its claims process and what it needs to start a claim. Relevant when the water came from a neighbouring lot insured by somebody else.

Two claims means two clocks, and they do not run together

Each claim gets its own set of Code timeframes, and they start when each claim is lodged rather than when the water arrived.

Ask for the reports on both. General Insurance Code of Practice, paragraph 82 entitles you to the information and the external expert reports an insurer relied on, within 10 business days of asking — and in a two-policy claim the two files frequently contain different accounts of the same failure.

The first 48 hours in an apartment

Do the extraction, then tell everybody

Inside your own lot, extraction is a reasonable step to prevent further loss and it does not need anybody’s permission. Common property does. Do the first, document it, and notify the strata manager the same day. The full checklist applies unchanged.

Photograph the failed component before it leaves

In a house, the plumber’s identification of what failed decides whether reg 19(1)(a)(vi) or reg 19(2)(b) governs. In strata it decides that and which of two policies responds. It is the single most valuable piece of paper in the whole claim and it is routinely thrown in a van.

Find out who else is wet

Water on level eight produces claims on seven, six and five. If you are the source, the other owners’ losses are a liability question and your policy’s legal liability section is the part to read. If you are underneath, you are one of several claimants on the same event and the assessor will be scoping all of them at once.

Drying an apartment is a different job

None of this is a policy question, but it decides the invoice.

• Nowhere for the moisture to go. A sealed apartment with no openable window on the wet side is a dehumidification problem rather than an air-movement one — and on the published rate card this site reproduces, a dehumidifier is $149 per unit per day against $69 for a carpet dryer.
• Concrete slabs are Class 4 drying. Moisture held in a slab does not come out on a four-day schedule, and a job quoted as a standard dry that turns out to involve slab moisture extends. What the classes mean.
• Somebody’s power runs the equipment for days, continuously. Inside the lot that is your meter; on common property it is the owners corporation’s. Settle it before the gear goes in.

On those published rates, one room of a lot dried over 4 days is $1,547 excluding GST, and two rooms over 5 days is $2,269. The calculator shows every line it adds.

What to do next

1. Work out which provision governs — six questions in your browser, and one of them is the policy type.
2. Read the words — what your policy calls it, because strata policies use the same eight event names as everybody else.
3. Work out how many excesses you are facing — excess, and paying more than one.
4. Get the lot dried while the apportionment is argued. Sydney has more strata than any other Australian capital, which is why the Sydney page is largely about this.

Common questions