Insurance excesses are one of the most common causes of disputes in sectional title schemes. Owners often ask why they must pay an excess when the body corporate has an insurance policy.
The answer depends on the policy wording, scheme rules, the cause of the damage and whether the claim relates to a specific section, common property or multiple areas.
The basic principle
Where the claim relates to damage to or arising from a particular section, the owner of that section is often responsible for the applicable excess. This is especially common with geyser and water damage claims.
Why owners are often responsible
Owners are usually responsible for maintaining their sections. If the claim relates to that section, the excess may be treated as the owner’s responsibility even though the body corporate policy responds to the insured loss.
When the body corporate may pay
The body corporate may be responsible where the claim relates to common property, shared infrastructure or a claim that is not linked to one owner’s section. The policy wording and scheme rules must always be checked.
Examples trustees should think through
- A geyser serving one section bursts and causes damage inside that section.
- A pipe serving one section leaks and causes damage to another section.
- A storm damages the roof or common property.
- A common property pipe causes water damage to multiple sections.
- Impact damage occurs to a boundary wall or common property gate.
What trustees should not do
- Do not promise that the body corporate will pay the excess before checking the policy.
- Do not assume all geyser-related excesses are handled the same way.
- Do not ignore scheme-specific rules or previous trustee decisions.
- Do not confuse maintenance responsibility with insurance cover.
Best practice
Trustees should keep a clear excess policy note, explain common excess scenarios to owners, and confirm the position in writing when claims arise.
Common questions
Can trustees decide that the body corporate pays all excesses?
Trustees should be careful. Any approach must be consistent with the law, scheme rules, policy wording and proper body corporate decision-making.
Does the excess change if multiple units are damaged?
It can. Some claims may involve more than one excess or different policy sections. The insurer’s claim assessment and policy wording must be checked.
Can the excess be recovered from an owner?
Often yes, if the excess is the owner’s responsibility. Trustees should ensure the process is properly recorded and communicated.