At every annual general meeting, there will be a standard motion on the agenda to renew the policy of insurance for the owners’ corporation (OC).
An owners’ corporation is required by the legislation to hold a minimum of $10 million coverage for acts that involve public liability, as well as replacement and reinstatement insurance for the value of all buildings and structures on the common property.
However, there are many other types of insurance that can be taken out by OCs, and owners should carefully review the policies and decide whether any of these extra types of insurance ought to be added to the policy.
Factors such as the age of the building and whether there are any legal disputes on the horizon ought to influence the type of insurance coverage that an OC should elect to add to its policy. I should point out, however, that OCs are required to comply with the utmost duty of good faith in disclosing any actual and potential issues to an insurer prior to entering into any policy.
In addition, owners ought to instruct their managers to obtain at least two quotes from different insurance providers, or otherwise use a broker. There are rumours that a large foreign-owned insurer will enter the market soon, offering competitive rates which may lead to lower insurance premiums in the coming 12 months or so. Watch this space.
By ordinary resolution at an AGM, the OC can decide to take out additional policies to cover things such as:
- Office bearers’ (committee) legal liability;
- Workers compensation;
- Fidelity guarantee;
- Machinery Breakdown;
- Legal defence expenses;
- Government audit costs;
- Appeal expenses; and
- Common property contents (for items such as art, floor coverings and furniture in the lobby areas).
Recent events such as the fire in the Lacrosse building in Docklands should serve as a sobering reminder to all that the operation of these types of policies ought to be of paramount to the OC.
Having good legal advice to translate the general and specific exclusions of each policy will also assist owners to understand exactly what level of coverage might be expected.
A comprehensive policy will provide ease of mind for both residents and owners alike. If owners are unsure about what policies will be right for them, a number of managers and brokers can organise a meeting and personal briefing with committees to discuss their options.
Tom Bacon is the principal lawyer of Strata Title Lawyers email@example.com