Strata Liability Insurance and Lot Owners’ Public Liability Cover

Building and public liability insurance requirements for an owner’s corporation, body corporate, or strata title scheme differ in each State or Territory.

In general terms, the legislation in each State or Territory requires an Owners Corporation to insure the buildings and common property of the Owners Corporation and maintain public liability insurance for specified risks that the Owners Corporation may be liable for. See the attachment below for an overview of the relevant requirements in each State/Territory.

The level of public liability insurance required is a minimum of $10,000,000 in all States or Territories, other than NSW which requires at least $20,000,000 of cover.

The legislation does not require an Owners Corporation to take out public liability insurance to cover a lot owner’s (or tenant’s) individual public liability risks. This means a lot owner (or tenant) will not usually be covered under an Owners Corporation public liability policy for risks that may arise within their own unit or on common property where the Owners Corporation is or would otherwise not be liable for the relevant claim.

For example:

· a lot owner has a visitor who slips on a wet floor in their kitchen and sustains a bodily injury resulting in a claim against the lot owner for negligence;

· a lot owner engages an electrician to install new lighting to their lot and the electrician is bitten by the lot owner’s dog while in the lot; or

· a tenant causes damage to another lot by overflowing their washing machine.

The Owners Corporation liability insurance would not typically cover these types of claims as the events did not occur within the Owners Corporation common property or as a result of the Owners Corporation’s responsibility. This may leave a lot owner and/or tenant exposed to these types of claims if insurance for these risks is not in place.

Many lot owners may not be involved in arranging or be familiar with the scope of Owners Corporation insurance and may not know or understand that this risk exposure exists. Some may mistakenly think the Owners Corporation’s public liability insurance will cover these risks.

Insurance brokers should be aware of this potential issue when arranging insurance for an Owners Corporation and ensure the Owners Corporation is informed of the limitations that apply to the public liability insurance cover for lot owners individually and their tenants.

Some issues insurance brokers should consider in relation to Owners Corporation’s liability insurance include the following:

Owners Corporation Coverage issues

• Consider whether the Owners Corporation needs liability cover in excess of the minimum legislative requirements based on their risk profile – a large residential complex with 1,000 units or a mixed-use residential and commercial strata property may need a higher level of cover than a small block of 4 units; and
• Remember to check that the insurance cover aligns with current legislative requirements in the applicable State or Territory at the time of placement – legislation changes over time meaning the insurance requirements may have changed since the last renewal.

Lot owner and tenant liability

• Advise the Owners Corporation in writing of the lot owner and tenant issue discussed above (examples could be included) and what you can provide by way of assistance/what they expect of you.
• If they do not require your assistance in this regard, make sure that in the documentation provided to the Owners Corporation, you note the issue and the limitation on your services, so that any person reading it will be aware of this. The Owners Corporation should make sure lot owners are advised of the limitation as well.
• If they do require your assistance (e.g you will be available to arrange insurance for lot owners liability etc), make sure that the documentation provided to the Owners Corporation sets out to what extent and act and issue documentation in accordance with this. Be clear in any communication with lot owners what services you will and won’t provide.

For a summary of Owners Corporation Insurance Requirements by State see the attachment below.