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Water damage and Insurance claim
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meganpepi
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22/08/2017 - 9:41 am
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I live in a townhouse. I noticed cracks appearing in my bathroom tiles. Apparently two areas of the roof were at fault. It wasn't until the weather was really bad that what was happening became obvious with water pouring through the exhaust fan in the bathroom. I had to call the SES. Water went down the bathroom walls & damaged part of the kitchen ceiling. Strata had the bathroom spot painted where the paint was peeling on the walls, ceiling & kitchen ceiling. Power points and lights were replaced along with the exhaust fan. The bathroom floor tiles now had about a dozen cracks. The sub floor was inspected and photos showed it was still damp two weeks after the storm. The strata manager will not bother with an insurance claim saying it was a gradual event. My contents insurance company have asked me to obtain something in writing explaining the tiles will not being replaced through insurance. This has not been forthcoming either and my phone calls and emails are not being acknowledged. I read an article that referred to a similar case as mine where the claim was accepted due to it being an unforeseen event due to the leakage of water not being apparent until the damage was too great. Over time with the sub floor being constantly wet and through people walking on the tiles the cracks occurred. Is there anything I can do to obtain help with my problem that occurred earlier in the year? Any comments would be greatly appreciated.

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scotlandx
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22/08/2017 - 1:23 pm
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It doesn't matter if it is gradual damage, that doesn't preclude an insurance claim.  The issue may be if there was a problem with the common property that the OC knew about and did nothing, in which case the insurance company may refuse the claim.  You are correct, in many cases an issue doesn't become evident until substantial damage starts showing.

I recently had several ceilings replaced that were badly water damaged, and the insurance paid for that - the damage occurred over quite an extended period of time, i.e. years.  The insurance company would not pay the claim out until we had the roof fixed, for obvious reasons, but they did pay.

I am not sure why the strata manager is dismissing your concerns - if there is an issue with the common property that has caused damage to your townhouse, then on the face of it the OC is responsible for fixing it.  From what you have said, no-one has bothered to find out what the cause of the water ingress is and I suggest that is the starting point.  If he won't come to the party, it would be worth your while to get someone in to determine what is causing it, and then write a very strongly worded letter telling the OC that they are obliged to fix it, assuming that the problem is being caused by a defect in the common property.

There is no point in replacing your tiles if there is something wrong with the subfloor - if it is still damp after two weeks this needs to be investigated.

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Sir Humphrey
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22/08/2017 - 1:43 pm
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Agreed. If the cause is a defect of the common property then the OC has to repair the common property so it doesn't keep happening and fix the damage to your unit caused by the defect of the common property. It is a separate matter for the OC to sort out whether they can identify an insurable event that caused the defect that caused the damage and get their insurance to cover the cost. 

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Austman
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22/08/2017 - 2:47 pm
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These can be complicated matters that may or may not involve insurable events, maintenance (or lack of), legal liability, negligence ... the list does goes on.

But there's nothing to stop you asking questions directly to your OC/BC's insurance company or insurance broker.  That's what I sometimes do.

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meganpepi
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22/08/2017 - 6:47 pm
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It's wonderful hearing I have a chance of an insurance claim. It just didn't seem right that some roof tiles had to be replaced having caused considerable damage to my bathroom in particular and yet the strata manager had not submitted a claim. Instead money has been taken from our strata accounts for repairs to my bathroom. The two areas of the roof with the tiles have been replaced. Despite sending photos of the damage to the bathroom and part of the subfloor the strata manager will not do anything about an insurance claim. Instead an inspection was organised to see whether my bathroom had been water proofed but the person undertaking the job only seemed interested in the shower handles. A building company also looked at the bathroom tiles so an approximate cost could be obtained. The handyman was asked to try & repair the cracked tiles! There has been no follow up with anything happening. The strata manager just isn't interested. I even spoke to another strata manager from the same company mentioning my calls and emails were not being acknowledged. I have not heard from this person. What should I do to receive further help with my problem so an insurance claim can be lodged when the OC is fairly dysfunctional (no one is really interested in even the AGM let alone anything else) and even moreso when the strata manager refuses to acknowledge I even exist! Is there someone or some place I can turn to?

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scotlandx
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22/08/2017 - 7:57 pm
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It doesn't matter whether you have an insurance claim or not - the primary issue is whether a defect in the common property caused the damage to your property.

If it did, then the OC is responsible for fixing the damage.  They have to lodge the insurance claim, and if it is refused then they have to pay anyway.

As I said above, get someone in if necessary to write a report on what caused the damage, and assuming it is caused by a fault in the common property then advise the OC that they have to pay for it.

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Austman
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24/08/2017 - 6:32 pm
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scotlandx said
It doesn't matter whether you have an insurance claim or not - the primary issue is whether a defect in the common property caused the damage to your property.

If it did, then the OC is responsible for fixing the damage.  They have to lodge the insurance claim, and if it is refused then they have to pay anyway.

I think it depends if the OC is legally liable for the damage.  And that might depend on the exact circumstances.

My experience is that the OC must be negligent for them to be legally liable.  It might be hard to establish that is some situations: burst water pipes inside walls comes to mind.

I've just gone though that exact event and neither the OC nor the OC's insurance company (CHU) would repair damaged lot property as they claimed they were not legally liable.  They said claim on contents insurance.  They did repair damaged common property and damaged lot fixtures and fittings covered by the OC's building insurance.

This building management company has the same view:

Unit Owners Exposed to Uninsured Losses

There has to be some sort of negligence proven against the Owners Corporation or Body Corporate for there to be any sort of potential liability.
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JimmyT
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24/08/2017 - 7:10 pm
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I'm going to weigh in here very reluctantly because the literature says one thing and simple logic (and common law) says another.

Let's start with the oft-quoted "Who's responsible ...?" document which is the liability "bible" for strata managers and anyone else who takes an interest in strata. Now, I know that is only technically applies to your scheme if you have adopted it under a by-law but you can bet if you take an issue to the Tribunal, it will be cited.  The document was conceived by the Lands Dept and given government blessing so it carries some weight.

Note 13 (below) says the owners corp is not liable for damage caused by a failure of common property unless the OC was provably negligent in its duties, which cause the common property to fail.

Some lawyers would say that failure to anticipate or check for a potential problem (such as ageing pipes) was negligence.  Others say that the Who's responsible document is irrelevant - common law says that if something belonging to you causes damage to something belonging to me, then you are liable for repairs.

The simple answer is to have home and contents insurance that would cover all sorts of potential problems.  And, if you don't have it, you have to ask yourself how it's going to cost you to convince a Tribunal or a small claims court that Section 13 of Who's Responsible is as flawed as a leaky pipe.

Note 13

If damage is caused to a lot owner’s property while the owners corporation are effecting a repair, the owners corporation are responsible to fix the damaged property. However, if the cause of the damage to the owner’s property was not made when the owners corporation were fixing the problem; instead it was caused by the problem itself, then the owners corporation are not responsible to make good the owner’s property unless the owners corporation can be deemed negligent. 

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Lady Penelope
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24/08/2017 - 10:11 pm
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meganpepi - If you can't get any help from the owner's corporation insurance company then it may be worth your while seeking help from the Office of Fair Trading and the Tribunal.

As JT said, a claim of negligence may be brought against the owner's corporation in some situations.

Negligence may be able to be claimed against the owner's corporation by the owner if the poor condition of the roof existed for such a length of time that the owner's corporation should have discovered and remedied the condition. There are 4 elements to be satisfied in a negligence claim: duty, breach of duty, causation, and damages.

The Tribunal has the power to make an Order for reimbursement of costs to the owner if the owner's corporation is found to be negligent. 

The owners corporation has a statutory duty and a strict liability to the owners to repair and maintain the common property: 

[s106(1)]  Strata Schemes Management Act 2015  states:

An owners corporation for a strata scheme must properly maintain and keep in a state of good and serviceable repair the common property and any personal property vested in the owners corporation.

[s106(5)] of the Strata Schemes Management Act 2015  expressly provides a lot owner with a statutory action to recover losses as a result of an owners corporation’s failure to maintain the repair and condition of common property. [s106(6)] allows an owner a time frame of 2 years to bring an action against the owner's corporation.

SSMA 2015 Sections 106 (5) and (6) states:

(5) An owner of a lot in a strata scheme may recover from the owners corporation, as damages for breach of statutory duty, any reasonably foreseeable loss suffered by the owner as a result of a contravention of this section by the owners corporation.

(6) An owner may not bring an action under this section for breach of a statutory duty more than 2 years after the owner first becomes aware of the loss.

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Austman
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25/08/2017 - 12:06 pm
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JimmyT said

Others say that the Who's responsible document is irrelevant - common law says that if something belonging to you causes damage to something belonging to me, then you are liable for repairs.

I think that's part of the issue.  Common law doesn't actually say that.  Usually negligence is required.  And in many circumstances common law has been replaced with other laws.

I agree that an OC could often be seen to be negligent.  But sometimes that's easier to say that than to prove.

In my latest example, and I've been through a few similar situations, a copper pipe burst inside a masonry wall.  It was, according to the OC, the first time it's happened.  So exactly how would the OC be considered negligent? How could they have reasonably prevented it from happening?  Did they breach any maintenance responsibility or duty of care?

Sure I could commence action against the OC. The OC has insurance including liability insurance. But the insurance company declared the OC not to be legally liable.   And most OCs would most likely accept that as being correct - after all the insurance company should hopefully know the situations that their policy covers...

I agree that a roof might be another matter but think it can depend on the circumstances.  In another OC to the above, we get the roof professionally inspected annually. The OC does this because it has been professionally recommended. If a defect occurred that the annual inspections didn't pick up, I'm not so sure the OC would be legally liable if that defect affected lot contents. And that has actually happened.  Fortunately insurance covered everything that time.

As to the "who's responsible?",  that has to be voted on to be valid and it doesn't of course mean an insurance company will be bound by it, so the OC itself might have to foot any bill.  In my case of the burst water pipe, lot property was damaged in order to access the pipe to repair it.  But the insurance company repeatedly refused to pay for that lot property damage.  So I'd have to claim against either the OC or my contents insurance.  I'm not sure I'd win the former and I'd have to pay excess on the latter.

Having both building and contents insurance is really the key to getting all damage covered.  But as the OP has discovered, a contents insurer might not pay until they are satisfied that the building insurer has denied cover.

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JimmyT
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25/08/2017 - 12:17 pm
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Austman said
Having both building and contents insurance is really the key to getting all damage covered.  But as the OP has discovered, a contents insurer might not pay until they are satisfied that the building insurer has denied cover.  

At the risk of being seen to promote our sponsors, if your strata scheme has CHU insurance and you have their home and contents insurance, you are covered and don't have to pay your excess.

And, more generally, anyone who doesn't have home and contents insurance with any firm is taking a gamble that they shouldn't expect anyone else to pay for when they get a fruit salad instead of three cherries.

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scotlandx
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25/08/2017 - 2:00 pm
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There have been two recent (2016) Supreme Court cases in NSW that held that an owner can't bring an action in negligence or nuisance against the OC.  That is, the OC does not owe an independent common law duty of care to a lot owner to maintain and repair the common property.  The two cases are James and McElwaine.

So if the insurance position put by Austman is correct (they will only pay out if the OC was negligent), there would currently be no basis for a claim at common law in NSW.  

However, section 106(4) of the NSW Act gives an owner a statutory right of action against the OC to recover losses arising from the OC's failure to maintain and repair the common property.

The important thing is to make sure that the OC's insurance covers the OC for claims under section 106(4). Our OC's insurance has paid out, but the terms of our insurance may be different to Austman's. Any owner should also maintain their own insurance, it would be very foolish not to.

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meganpepi
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25/08/2017 - 6:17 pm
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I have enjoyed reading your interesting comments and appreciated help and can see it's a complex situation. My kitchen ceiling has a ducted vent which was probably installed previously due to water damage. It was through removing this vent that part of the sub floor from the bathroom could be accessed and the photo taken. When I had inquired about any water damage from earlier years to my townhouse an incident was noted from 2006. No details were mentioned.

On a positive note I met the strata manager yesterday (whether the outcome is positive in any way remains to be seen) after calling her office once again. She visited my townhouse to discuss the matter further and to see the bathroom and kitchen. She couldn't understand why the floor tiles were cracking (long hairline cracks) and hadn't seen this before. She also mentioned CHU wouldn't cover the claim unless we had proof as to why the tiles were sporting cracks. Apparently tiles are meant to withstand all types of treatment. An inspection is being organised with another tile company so that we can hopefully find out more about the tiles. 

I may think about changing my contents insurance to CHU when the strata is with them. There wouldn't be overlapping of various items. 

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Lady Penelope
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25/08/2017 - 9:32 pm
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scotlandx -  It is not [s106(4)] that deals with damages for breach of statutory duty .... it is actually [s106(5)].

[s106(5)] states:

'An owner of a lot in a strata scheme may recover from the owners corporation, as damages for breach of statutory duty, any reasonably foreseeable loss suffered by the owner as a result of a contravention of this section by the owners corporation.'

The two cases that you mentioned from 2016, James and McElwaine, were decided prior to the introduction of the new Act. The current position since the new Act was introduced is that an owner is advised to seek relief through the statutory law process i.e. the provisions in the Act, rather than the common law.

Although a claimant can no longer seek relief through the common law, a claimant is not left with no relief against an OC. This is because a claimant can now seek relief through SSMA 2015 [s106(5)] - breach of statutory duty.

McElwaine (which involved water ingress) would most probably have been decided quite differently under the new 2015 Act, than it was under the old Act.

Statutory negligence can be claimed against the OC rather than common law negligence. Negligence in statute is different from common law negligence. Negligence in statute refers to a claim for breach of a statutory duty. The OC's statutory duty is contained within [s106(1)].

It is my understanding that in such cases of a breach of statutory duty it is not necessary to prove the existence of a duty of care, all that one has to do is establish that the OC was obliged to take some action under a statute or regulation, and that the OC has failed to do so, and that as a result the claimant suffered an injury or loss. The loss can be a financial loss. (NB:There is no need to prove the 4 common law elements of negligence which I mentioned in a previous comment.)

Owner's corporations face an increased exposure to liability claims under the 2015 Act if they fail in their statutory duty to repair and maintain common property. OCs need to be aware of this and should adjust their insurances accordingly.

This article is well worth reading: 

http://www.landers.com.au/insights/publications/projects-construction-and-infrastructure/strata-legislation-update-damages-for-breach-of-the-duty-to-repair-and-maintain-the-common-property/

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scotlandx
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25/08/2017 - 11:44 pm
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Sorry I got the subsection wrong Lady Penelope but I'm not sure what the problem is, that is what I was saying - you have a statutory cause of action, so you don't have to worry about negligence?

The two cases are relevant, because the SC held that there is no common law right of action which may be separate to and sit alongside a statutory right of action.  

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Austman
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28/08/2017 - 1:18 pm
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Lady Penelope said
This article is well worth reading:

http://www.landers.com.au/insi.....-property/

It's a very interesting analysis.

The authors note that s.106(5) uses the words "reasonably foreseeable":

any reasonably foreseeable loss suffered by the owner

And that's why they think damages would have been awarded to McElwaine under the 2015 Act.

In my above example of a burst copper water pipe inside a solid wall, I wonder if it would be considered a reasonably foreseeable event? 

I can't see how the OC could have reasonably foreseen it (to prevent it), in which case the OC might not be liable for any damage it caused to lot property.

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