Insurance Payout Must be Handed Over to Strata Owner

Powell v Owners Corporation 537738Y (Owners Corporations) [2023] VCAT 1006

Quick Read

This 2023 decision by VCAT is about a dispute in a small 5 lot Upwey strata title building about transferring an insurance payout to a strata owner. After the second time a strata lot flooded the strata owner made a claim on the insurance the strata building had organised for the common property and strata lots. There were ongoing disagreements about the claim but AFCA determined a payout amount and the insurer paid $240,529 to the strata building as the contracting party instead of the strata owner who suffered the damage. The strata building wouldn’t transfer the insurance payout unless the strata owner had signed a contract to remediate the damage. There was also an ongoing Federal Court appeal by the strata owner about the insurance payout amount that complicated things. The key issues for VCAT were to properly characterise the insurance payout and to decide the strata owner’s rights to the payout. After considering the strata building’s 5 arguments, VCAT decided that the insurance payout was held by the strata building as agent for the strata owner, that insurance laws weren’t’ relevant, there was no trust over the money, the ongoing appeal didn’t matter and nothing in the Owners Corporation Act 2006 gave the strata building power to impose conditions. The decision clarifies that insurance payouts for strata owner damage claims belong to the strata owner even if paid via a strata building and that strata buildings can’t impose conditions on the use of insurance payouts under insurance or Victorian strata laws.

Implications

Insurance payouts for strata lot damage are not held on trust by strata buildings.
Instead, strata buildings receive and hold insurance payouts for strata lot damage as agent for the strata owner.
An insurer’s payment of money for strata lot damage to a strata building as the contracting party has no special legal effect.
Insurers can‘t properly impose conditions on insurance payouts once settled or determined by ACFA.
The Insurance Contracts Act is not relevant to internal strata handling of payouts.

For the all the implications of this strata case [and all the other Strata Case Watch] become a paid subscriber to GoStrata Stak

Full Report & Case Details

This 2023 decision by VCAT is about a dispute in a small 5 lot Upwey strata title building about transferring an insurance payout from the strata building to a strata owner.

This strata building was flooded twice, in 2007 and 2016, and the floods damaged one of the strata lots each time. After the 2007 flood, the strata owner made a claim on the strata building’s insurance policy [which covered both the common property and strata lots] and she was paid $57,670 directly by the insurer.

After the 2016 flood, the strata owner made another claim on the strata building’s insurance policy [which covered both the common property and strata lots] for the damage to her lot. Over the next few years, the strata owner and insurer advanced and negotiated the claim, but they could not agree on the payout amount. The strata owner asked the claim to be reviewed by the Australian Financial Complaints Authority which made a determination that the insurer pay $220,054 plus $10,000.

The insurer then paid $240,529 [more than determined] to the strata building, but not to the strata owner.

The strata owner appealed the Australian Financial Complaints Authority determination to the Federal Court saying that it should have been more and that appeal is ongoing.

The strata building refused to pay the $240,529 from the insurer to the strata owner unless she first signed a contract to repair her strata lot, which she refused to do.

The strata owner asked for orders that the strata building pay the $240,529 from the insurer to her arguing that she was entitled to the money and the strata building could not impose conditions on paying it to her.

The strata building said it was entitled to retain the insurance payout as she was not a third party beneficiary of the insurance, that they held the insurance payout on trust for the insurer for the repair of her strata lot, and/or that they had an obligation under the Owners Corporation Act 2006 to reinstate the building including the strata lot entitling it impose the condition on payment.

The primary issues were to consider the validity of the strata building’s arguments, properly characterise the insurance payout, and to decide the strata owner’s rights to the money …

For the full report on & details of this strata case [and all the other Strata Case Watch] become a paid subscriber to GoStrata Stak

Keywords

#VIC #VCAT #insurance #trust #agency #conditions #2023 #OCA2006 #s59 #ICA1984 #s48