Compulsory Body Corporate Insurance

Types of Building Insurance

Each body corporate must have an insurance policy, and the nature of the coverage will be defined in that policy. The policy must meet the minimum requirements of the BCCMA and its modules. Currently all the modules are identical.

There is often confusion as to what the body corporate must insure, and what the Lot Owners must insure. The body corporate insurance obligations extend further than an obligation to insure the common property.

• Compulsory Body Corporate Insurance
• Insurance of Body Corporate Assets and Common Property

The body corporate must insure, to the full replacement value the common property and the body corporate assets.

Public Liability Insurance

The body corporate must maintain a certain level of public risk insurance of the common property (NOT within the lots) and other relevant body corporate assets. This is to protect against such events as “slip and fall” cases.

Body Corporate Building Insurance
The body corporate must take out insurance to cover certain types of buildings. See the heading “Building Insurance” for a detailed explanation of the types.

Non-compulsory Insurance
In addition to the compulsory insurance the body corporate may take a policy to cover directors and office bearers (i.e. committee and executives) liability incurred by committee members during the proper discharge of their committee responsibilities.

Building Insurance
With building insurance there is a distinction between the insurance requirements for different types of community titled property. The different types of community titled property that have different insurance requirements are -
• Building format plans – an example is the units in a high-rise tower.
• Standard format plans – an example is freestanding homes or houses.
• Standard format plans with buildings that have a common wall – an example is units like townhouses with a common wall, or even a duplex.

Building Format Plan Lots
For building format plan lots the body corporate must insure the building, which includes all the lots that are within the building.

Standard Format Plan Lots with No Common Walls
The body corporate does not have an obligation to insure the structures on standard format plan lots with no common walls. The owners of these lots should insure them individually. This is equivalent to the position for non-community titled property. However, the body corporate (while it does not have an obligation to insure these free standing lots) may choose to implement a voluntary scheme, which allows owners of these lots to “opt-in” and insure their structures under a policy with the body corporate. This could result in a cost saving.

Standard Format Plan Lots With Common Walls
For a standard format plan the body corporate must insure any building with a common wall with another lot.

Owner's Insurance Responsibility

Where an owner has a lot, created under a standard format plan, where the building upon it is freestanding, then that owner must insure both the building and the contents. This is subject to the owner participating in a voluntary scheme.

All lot owners must arrange their own contents policy to cover carpets and non-fixtures, public liability insurance and workers compensation insurance within their lot.

What is Covered
Where the body corporate insures a building, the ‘building’ includes improvements and fixtures.
Examples of these are –

• Out buildings
• Closed in balconies
• Marinas
• Fences
• Walls
• Docks (non –fuelling & non – commercial)
• Elevators
• External signs
• Gates
• Ducted air-conditioning
• Escalators
• External awnings
• Satellite dishes
• Swimming pools
• Insinkerators
• Masts
• Underground services
• Sinks
• Towers
• TV & other antennas
• Basins
• Shower screens
• Baths
• Fixed tiling
• Stoves
• Toilets
• Pontoons
• Doors
• Built in cupboards
• Pergolas
• Windows
• Wharves

The “building” does not include –

• Carpets
• Carpet underlay
• Floating floors
• Fixtures removable by a lease at the expiration of the lease
• Temporary floors
• Ceiling coverings
• Temporary wall

The body corporate insurance obligation is more extensive then the body corporate maintenance obligations. While a body corporate must insure certain areas within a lot pursuant to the definition of “building”, the owner of the lot, at the owner’s expense, still must maintain the areas.

What Risk Must Be Insured?
The insurance for these buildings must cover damage. This means –
A Earthquake, explosion, fire lightening, storm, tempest and water damage; and
B Glass breakage
C Damage from impact, malicious act and riot.
The insurance must be for the full replacement value.

Paying Premiums

The owner of each lot must contribute to the body corporate funds for the proportion of the insurance policy premium that reflects the value of the building on the lot.

For a building format plan lot the proportion is considered to be the interest schedule lot entitlement of the lot. For standard format plan lots it is the value of the building on the lot. Consequently owners of these standard format plan lots must advise the body corporate of the value, or any changes in value.
For lots in a building format plan, if there are improvements undertaken to the lot that increase the value of that lot, then the owner must advise the body corporate so the insurer can be placed on notice, and the insurance adjusted accordingly.

Similarly, if the owner of any insured lot has a change of use of that lot that may impact on the insurance (e.g. a fireworks manufacturer move then they must also advise the body corporate so that the insurer may be placed on notice and the policy may be adjusted if appropriate. The owner will be responsible for any increased premium.)

Insurance Excess

The body corporate insurance policy will often contain a clause requiring the payment of an excess, in the event of a claim. Where the damage affects only one lot then that lot owner will be responsible for paying the excess. Where the damage affects more then one lot, or a lot and common property then the body corporate should pay the excess. The body corporate may change these general rules where it is unreasonable to expect a particular party to pay the excess. The body corporate may also decide to share the excess between the parties.