Building Insurance - Are you well and truly covered? | Owners Corporation Network

Building Insurance - Are you well and truly covered?

Workers survey and make temporary repairs to 14-22 Water Street, Lidcombe.

Workers survey and make temporary repairs to 14-22 Water Street, Lidcombe. Photo: James Alcock


Contributed by Dino Biordi
If we cannot rely on our government, council, builders, or developers, (and everyone in between), to properly erect safe and stable dwellings, who then can we trust?
Recently, the strata news spotlight has been shining brightly on the case whereby the insurer giant AIG, who claims to be “Protecting Australians for more than 50 years”, is withholding payouts to repair a residential building that was hit hard by storm damage. The building sustained damage significant enough that it left the inhabitants unable to return to their homes for the foreseeable future.
The reason for refusing to pay the claim, as provided by the AIG experts, was that the building did not comply with The Building Code of Australia. More specifically, AIG concluded that the roof failed to meet the basic standards that would otherwise have sustained the violent weather conditions that it was exposed to.
Two main issues with this ruling were that not only did the local council both approve and certify the building, (including modifications to the construction of the roof); AIG had no issue in accepting insurance premiums from these people.  Subsequently, the owners and occupiers were provided with a false sense of security in believing they were adequately covered, yet in reality were left in a worse position financially for choosing to insure with AIG when their claims were ultimately rejected.  
The truth is, there are many reasons why insurance companies like AIG can reject claims in relation to building damage – or indeed for any type of insurance claim. They have better clauses (fine print) and lawyers to protect themselves from these larger payouts, and this seems to be where they divert their energies rather than into their desire to truly protect their clients. Ok, so we know in this example it was poor workmanship at the construction stage – therefore, shouldn’t the government, local council, or AIG, with all their mighty powers help homeowners take the developer, builder, or certifiers to court to seek payouts? After all, typically your home is your greatest investment – yet as a car owner, why do feel that I am better protected? 
Tough questions need to be asked. Should due diligence not be a two-way process?  Where were these experts hiding when they initially agreed to insure the building? Surely they demanded an independent auditor's report of the building health - or at the very least, requested this information be presented as part of the sales and acceptance process? How can you request payment of premiums for cover that, according to your own policies, doesn’t even exist?  Will AIG now refund those premiums to the homeowners? 
On a darker note, to what extent, (if any), did a ‘conflict of interest’ amongst the big players affect the certification process? And lastly, are these providers intentionally charging clients premiums to ‘insure’ the virtually uninsurable?
Sadly, the focus on many of these processes is around costs and commissions rather than ensuring adequate cover for homeowners. I confess that I know little about the minute details of insurance operations, but I do feel that society needs to stand firm against decisions made by corporate giants and authorities that result in residents forced out of their homes and financially punished through no fault of their own.  
So, who can I turn to?
There are good reasons today to hire independent consultants who are experts in their field and can represent your best interests. Using qualified experts experienced in strata schemes will help with building and engineer reports, undergoing tender processes, and in putting forward recommendations.
I believe all Executive Committees should consider,
1.    Consulting an independent Building Consultant to provide building inspection reports and structural engineering technical assessments.
2.    Consulting an independent Strata Consultant as a trusted advisor to help Committees choose a suitable strata management agent to meet their needs.
3.    Registering their building with Australian Building Management Accreditation
N.B. Is this full proof? No, but it is the next best thing. You need to hire someone to represent you - someone that has your best interests at heart. Experts can give you advice on anything from solutions to repair defects or broken administration, and can advise the best practices to maintain your assets. 
Through the lens of Building Management, I would like to discuss point three a little more:
A Building Management Plan is a great way of protecting your infrastructure and facilities. 
Part of adopting a Building Management Plan is to have a goal toward building accreditation. Once you register your building, the Australian Building Management Code will assist the Accreditation process. 
I understand that in undertaking the process of setting levies, Developers, Strata Managers, and Executives Committees feel pressured into keeping levies as low as possible; however, this is short-term thinking. We need to understand that assets, (i.e. the building services and facilities), can have a healthier lifecycle if maintained according to the manufacturer’s warranties and recommendations. Just like we humans need to look after ourselves to enable a fuller life, we need to do the same with assets to prevent them coming to their end prematurely. 
Changing our focus to long-term thinking and ensuring a proactive maintenance schedule is adhered to will preserve and maintain the life of a building. Of course, we need to explore more effective and efficient ways to implement any strategy, and that's where you can lean on your Building Manager and their expertise to highlight and present these opportunities for consideration.
On completion, your building is signed-off by engineers and experts in their field, but how do you ensure you building is maintained at that same level? 
Registering your building with the Australian Building Management Accreditation (ABMA) is the first step to making sure that your structure complies with statutory maintenance and safety obligations.  It also ensures that it is being serviced to the National Standards as detailed in the ABMA Code and associated Acts, Regulations, and Standards.  Taking steps to have your building registered with the ABMA also helps with limiting the risk of an insurance claim rejection.  
Just consider the high chance that a new strata building will pop up in your neighbourhood in the near future which will inevitably be your "property market" competitor. The long-term view of maintaining an A-Grade building will deliver higher yields and be regarded as a less risky purchase than the new unestablished building. 
Something to ponder,
“It's unwise to pay too much, but it's worse to pay too little. When
you pay too much; you lose a little money - that's all. When you pay
too little, you sometimes lose everything, because the thing you
bought was incapable of doing the thing it was bought to do"
John Ruskin
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