Water damage and Insurance claim

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.

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.

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.

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. 

@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.

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.

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: 

https://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/

@Lady Penelope said:
This article is well worth reading:

https://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/

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.