One of the biggest expenditure for a Body Corporate is having to maintain current insurance coverage. Insurable events are normally reported to the appointed Insurance Broker to assist with lodgement with the Insurer. Part of the function of Insurance Broker is to liaise with the Insurer on behalf of the Body Corporate. Working closely with the Insurance Broker can make a big difference in ensuring that the Body Corporate's best interest is represented.
North Management had recently completed an insurance claim process for one of our Members in relation to the Earthquake off of Banda Sea in 2019. Upon receiving reports from a few of the Owners stating that there have been damages sustained to the building, North Management advised all Owners to carry out a thorough inspection and to report further observation of damages and to submit all to our office.
From this it was found that damages in units observed were not present prior to the Earthquake, this is apparent from a few routine inspections carried out by the Owners' agents. The reports include clear photographs from where it was determined the state of the unit prior and after the insurable event.
It was agreed that the Body Corporate would submit an insurance claim in relation to the insurable event. The Body Corporate was informed that due to an increase of insurance claims relating to the Earthquake, an engineer's report is prudent to verify the veracity of such claim. Although it was initially suggested that the Body Corporate arrange for such report to be produced, the Insurer then advised that the report will be carried out by an engineer of their choosing.
This progress was welcomed by the Body Corporate Committee, as organising an engineer's report this early on the insurance claim process would carry an outright cost to the Body Corporate. The Committee did not raise an issue with the arrangement.
Upon further update from the Insurance Broker, the Body Corporate was advised of the Insurer's final decision for the Earthquake claim. Based on the engineer's report, the Insurer concluded that they are under no obligation to honour the claim and to decline the claim under faulty workmanship being the cause of all damages observed post-Earthquake.
The Owners definitely did not appreciate the reasoning used by Insurer and instructed North Management to dispute the final decision by the Insurer. The Chairperson of the Committee also suggested this should be brought to the attention of Financial Ombudsman Service. North Management then worked with the Insurance Broker in communicating the instruction of the Body Corporate to dispute the Insurer's decision. Before the decision can be taken to the Ombudsman service, an internal dispute resolution (IDR) needs to be carried out as a standard process for all claims.
The Insurance Broker advised in order to proceed with IDR, the Body Corporate would have to provide an alternate engineers' report to support the dispute claim. North Management arranged for this to occur and the report was made available to the Insurance Broker for further action. The Insurance Broker was helpful in getting the initial dispute processed and completed with the Insurer's team. Unfortunately the decision did not change even after the case was re-examined.
North Management on behalf of the Body Corporate instructed the Insurance Broker to submit the case to Australian Financial Complaints Authority (AFCA). On the basis that the Insurer should not have rejected the claim, as the damages sustained can clearly be attributed to the Earthquake. AFCA carried out its review of all the documents available, including the engineer's report newly obtained by the Body Corporate, and the original engineer's report produced for the Insurer.
After a complete review, the representative of AFCA determined that the Body Corporate is correct in its assessment and sentiment that the Insurer should honor the claim. AFCA made the determination while driving home each individual point as to why the claim needs to be honoured. The Insurer is required to complete the repairs. AFCA iterated as another option the Insurer may choose to cash settle the original quoted amount for repairs plus an uplift of 10%, to cover for contingencies and interest at the relevant amount from the time of initial claim rejection to the date of payment. The Insurer was also instructed to refund the cost for the Body Corporate to supply the additional engineer's report.
With an effective communication and professional relationship between North Management and the Insurance Broker. We were able to push through the claim towards a better outcome for our Members.
Owners are encouraged to periodically document the condition of their unit, inspection reports that include photographs can be a determining factor as supporting evidence in claims such as this. If your Body Corporate is experiencing something similar, work with your Body Corporate Manager and if available your Insurance Broker to allow for a more coordinated effort in convincing your appointed Insurer that your case is warranted.