The SSKB team of professionals deal with many enquiries on a range of issues to do with body corporate insurance. The following information will outline some of the general provisions in relation to the Body Corporate and Community Management Act (BCCM).
The body corporate must insure common property and body corporate assets and buildings in which lots are located to their full replacement insured value.
BCCM makes it compulsory for bodies corporate to obtain professional insurance valuations at least every 5 years to make sure that the common property areas are properly covered.
The body corporate must take out public risk insurance over the common property and for assets where it is practical to have public risk insurance. The minimum cover is $10 million. We recommend that committees insure their reasonable activities through office holder indemnity insurance.
The type of strata plan (normally a building format plan or a standard format plan) affects the body corporate’s responsibility to insure a building.
In the most common type, the building format plan, the body corporate insures the whole building and common property areas and assets. The building insurance policy must cover damage and the costs associated with the reinstatement or replacement of insured buildings (including the cost of taking away debris and the fees of architects and other professional advisers) and provide for the reinstatement of property to its condition when new.
If the complex is under standard format plan, the body corporate has the obligation to insure common property and the body corporate’s assets (to full reinstatement value) and to ensure that buildings that have common walls with lot owners are insured (to full reinstatement value).
The body corporate may set up a voluntary scheme to insure the buildings where there are no common walls between lots. Owners of a lot with a standalone building are not obliged to take part in such a voluntary insurance scheme. They do have to pay their share of other body corporate insurance (eg insurance for common property and body corporate assets).
The basis for calculating the insurance premiums for common property and for body corporate assets (and for building reinstatement insurance in Building Format plan complexes) is the interest schedule lot entitlements, not the contribution schedule used to calculate most body corporate expenses. Under the standard format plan where there are lots with common walls, the body corporate must arrange the insurance for the buildings and charge the lot owners their proportion of the costs of the insurance for reinstating their lot.
Special rules apply allowing the body corporate to charge owners extra insurance if they have made improvements to their lot that have affected the premium paid by the body corporate, or if they conduct activities on the lot that affect the premium paid.
Where there is an excess on a policy and the event covered by the insurance claim affects one lot, the lot owner is usually liable to pay the excess amount, unless the body corporate decides that it is unreasonable in the circumstance for the owner to bear that liability.