Hi Jeff,
You may have this all covered but the OC needs to understand the possible consequences of insuring at a value other than what is determined by the valuer. This will be specific to the policy with the insurer but according to my understanding of the way it works either “under insuring” or “over insuring” can result in the OC being out of pocket. You need someone to understand your OC’s specific policy contract.
You take out insurance for the building you have not the building you think you should have. An insurance policy is usually for the property where it is, as it is and unless there is some “legal or other” requirement that it not be rebuilt ‘where it is and as it is’ the insurance company may not cover you. As your OC know of these “legal or other” requirements they are something the insurance needs to be made aware of and accept.
You state “our strata property would never been rebuilt the way it is now” and that seems to be one of the arguments the OC is adopting for picking a valuation other than that of the valuer’s. Does the insurance company know and accept that the “strata property would never been rebuilt the way it is now”?
From what you have stated I think the Strata Manager is trying to do the right thing by the OC. If the OC under insurers and there is a total loss the insurance company would be well within its rights to pay less than the agreed under insured value. Your OC has to make sure it has made full disclosure to your insurance company that in the event of total loss the OC intends to build different structures at a different cost, this is so the insurance company can factor this in to the premium it charges.
As as really rough example, if you under insured for only $8,270,000 (ie approx 82% of $10,046,400) and the building suffered a total loss the insurance company would probably be entitled to, at best, pay you only $6,781,400 (ie 82% of $8,270,000). In the worst case the insurance company might be entitled to pay you less than that arguing that the OC didn’t make a proper disclosure.
The above is all my opinion, but the OC needs to really be sure of the consequences of what it is doing and its obligation to disclose all relevant facts to the insurance company.