Insurance Claims in Sectional Title

Insurance claims in sectional title environments remain a persistent source of confusion and possibly even tension. By grasping the fundamentals and understanding how the process unfolds, both unit owners and trustees can better navigate their roles and set realistic expectations.

What Falls Outside Insurance Cover?

Before discussing what's covered, it's crucial to understand what insurance won't pay for.

Policies typically exclude damage resulting from gradual deterioration, inadequate maintenance, or aging infrastructure.

Common exclusions include:

• Waterproofing failures leading to water penetration over extended periods

• Recurring rain damage from balcony leaks in upper units

  
  

• Ceiling deterioration from slow-dripping bath traps or showers

• Pipe damage where aging, rust, corrosion or pinhole leaks are involved

• Wall and tile cracks unconnected to any sudden insurable incident

• Dampness and mould growth

• Water seepage from deteriorating pipes

• Rain ingress due to improperly sealed windowsills

• Defective workmanship consequences

• Vehicle damage from falling roof tiles during windstorms

• Owner's personal property losses after storms or fires

• Gradual pipe damage from invasive tree roots

Additionally, certain structural elements may fall outside standard cover definitions, including thatched roofs, canvas awnings, signage, specialised glass installations, retaining walls, landscaping features, timber decking and balustrades.

Theft cover deserves special attention. Items like copper piping, gate motors, security cameras, and air conditioning components aren't automatically protected. While sectional title legislation doesn't mandate theft cover, it can be added upon request.

Both trustees and owners should verify exactly what theft protection exists in their policy.

Understanding Covered Events

Insurance exists to protect against sudden, unexpected incidents, not to substitute for ongoing maintenance. Damage must occur abruptly, unpredictably, and directly result from specific events.

Typically covered incidents include:

1. Fire, lightning strikes, and explosions

2. Wind, hail, storms, and snow damage

3. Burst pipes (excluding wear-and-tear failures)

4. Geysers or Heat pumps

5. Impact events, such as vehicles colliding with gates or walls

6. Accidental damage, like spills to fitted carpets

7. Flooding and sudden water damage

8. Break-in related damage

The Role of the Body Corporate

Understanding who holds the policy is fundamental. The body corporate serves as the insured party. While individual owners maintain certain rights and interests in the cover, sectional title legislation clearly places insurance management, including claims and repairs, under trustee oversight.

Trustees bear responsibility for insuring buildings at full replacement value and negotiating premiums, excesses, and rates for the body corporate. Effective negotiation, typically conducted annually, requires trustees to understand the scheme's claims history and receive proper guidance from their appointed broker.

Authority and Documentation Requirements

Prescribed management rules establish that body corporate documents require signatures from either two trustees or one trustee alongside the managing agent to be valid and binding. This applies to claim forms as well. While obtaining these signatures isn't always straightforward, many managing agent contracts delegate this authority and Ideally, trustees should ratify such delegated claims at their next meeting.

The Claims Submission Process

When a claimable event occurs, proper procedure matters significantly. The affected owner should complete a claim form, readily available from the managing agent, in their own handwriting, documenting the evidence. This form, along with supporting invoices, quotations, and damage reports, should reach the trustees or managing agent promptly.

The authorised signatories then validate and submit the claim to the insurer, usually through the appointed broker. Claims must be lodged within 30 days of the incident.

Once submitted with complete, accurate documentation and proper signatures, processing moves quickly. Many insurers settle straightforward claims within 48 hours. More substantial or complicated claims require a loss adjuster's appointment, which happens promptly but extends the timeline, sometimes several weeks. Complexity increases when contractors must verify quotes or revise specifications. The loss adjuster ultimately prepares a recommendation report for the insurer.

The insurer will then settle the full claim amount, negotiate a reduced settlement, or decline the claim.

When Disputes Arise

Since the body corporate is the insured party from the insurer's perspective, any owner disagreement must be channeled through the body corporate. If the body corporate itself disagrees with an owner's position, the dispute lies between that owner and the body corporate, not between the individual owner and the insurer.

Trustees must maintain control in all owners' interests, while individual owners need awareness of their rights and proper procedures when they feel aggrieved.

Establishing Your Claims Procedure

Each body corporate should develop a claims procedure tailored to its unique circumstances, whether it operates with an estate manager, managing agent, or through self-management. Clear communication of this procedure helps owners understand exactly what steps to take when claimable events occur.

A well-structured approach, with your broker providing expert guidance to filter and properly prepare claims, ensures submissions are efficient and accurate. Poorly completed claims often face rejection when they should have been approved.

Professional support throughout the process makes a significant difference.

The key is balance: trustees shouldn't arbitrarily refuse legitimate claims, but they can prevent unnecessary claiming when something clearly falls outside cover. With proper procedures and professional guidance, the claims process becomes far more manageable for everyone involved.