There are plenty of more interesting real estate subjects to talk about, but few have the potential to be costlier. I have been prompted to write about this subject following the discovery that a free-standing unit in a duplex being sold by us did not have the common property insured. When a multi dwelling is strata titled, a body corporate is automatically created to manage the common property. In most duplexes the responsibilities, such as insurance is shared by the two owners and a body corporate manager is not employed. So, what is the problem with not having the common property insured. Firstly, it is a breach of the act but there are even greater issues in play.
Queensland has the Personal Injury Proceedings Act (PIPA), this enables anyone who believes they have suffered a personal injury caused by negligence to join any and all parties in their attempt at receiving compensation. PIPA legislation makes it easier for persons to seek compensation for personal injury, there has been a rapid increase in Personal Injury actions.
Under QLD Strata legislation, the Body Corporate has unlimited liability for any claims made against the Body Corporate. This in effect transfers that liability to the Lot Owners. This Liability can be transferred to an Insurance policy that will respond to the Insured risks.
A Public Liability policy provides cover for all common (shared) areas of a Body Corporate. In a body corporate scenario, it does not extend to within the individual lot or unit. Public Liability provides cover for Third Party Personal Injury and Property Damage.
We do see claims against the Public Liability coverage in strata policies. They are generally claiming for personal injury where a person will allege, they suffered an injury due to the negligence of the Body Corporate.
I spoke to our insurance people and they advised that they have just seen a claim settled for $138,000 where a visitor alleges, they fell down internal stairs (common property) in a 6 unit 2 story strata block.
As another example they have an ongoing claim where a visitor to a 3-unit strata plan alleges they tripped on uneven pavers causing them to fall. They fractured a wrist and shoulder and they have not been able to work for over 6 months. The Insurer is defending this claim and they have an estimate of $75,000 including legal costs.
If there is no Public Liability in place, then the Body Corporate will be forced to fund a defence and any settlement themselves. Defence costs alone can run into many thousands of dollars. If the Body Corporate does not have enough funds, then Lot Owners would be personally responsible for any shortfall.
The situation is very similar for home owners and in most cases legal liability forms part of your household insurance. Be careful to check yours does, especially if you are renting the property to tenants.
If you are unsure of your position, we recommend you seek advice from your Property Manager we will be happy to help protect your interests.