Please Sir, Can I Spend $1.2 Million on Strata Insurance?

McWhirters Apartments [2024] QBCCMCmr 44

Quick Read

This 2024 decision by a Queensland Body Corporate and Community Management Adjudicator is about a dispute [kind of] in a large historic Fortitude Valley strata title building about its building insurance coverage. We don’t usually prepare Case Watch about single member Tribunal decisions since they’re not binding and usually very building specific, but this one is a bit different. This strata building had been insured for $120 Million at a yearly premium of $280,645 up until early 2024 when the existing insurer refused to renew the policy because of increasing claims and defects that had been identified in the strata building. When the strata building tried to find another Australian insurer it couldn’t. Eventually Lloyds of London offered insurance but at a yearly premium that was more the 4.5 times higher at $1.2 Million. Time was running out on insurance cover, the strata committee was not able to spend that amount and there wasn’t time to hold a strata owners’ meeting. So, the strata committee asked the BCCMA Commissioner for orders authorising the insurance policy and premium cost. After reviewing Queensland strata insurance provisions and its powers, the BCCMA Adjudicator decided that the insurance policy was compliant, there was an emergency about insurance and that it was appropriate to authorise the $1.2 Million premium. The decision is unsurprising since it’s about having insurance to protect strata owners’ risks and also extraordinary by authorising such a huge expenditure. It also demonstrates the impact of the Australian strata insurance crisis on strata buildings. But it’s concerning as the decision was made urgently, without notifying strata owners, and without any contrary arguments or opposition.

Implications

Queensland strata buildings must insure buildings for their full replacement value under s 187.
An alternative insurance policy can be approved by the BCCMA Commissioner under s 188(4).
Spending outside the strata committee’s limit can be approved by the BCCMA Commissioner under s 162(1)(c) for an emergency.
In emergency circumstances, the BCCMA Commissioner can also bypass the normal notification, submission and referral procedures under s 243A so that an Adjudicator can make orders.

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Full Report & Case Details

This 2024 decision by a Queensland Body Corporate and Community Management Adjudicator is about a dispute [kind of] in a large Fortitude Valley strata title building about its building insurance coverage.

We don’t usually prepare Case Watch about single member Tribunal decisions from NCAT, VCAT, QCAT or Adjudicators since they aren’t binding on anyone and usually are too case fact specific to provide useful guidance. But this one is a bit different and significant enough to make an exception.

This strata building has 114 residential and commercial strata lots developed from the historic 100 plus year old Brisbane McWhirters department store and is heritage listed.

Up to the end of 2023 the strata building was insured by CHU for $120 Million at a yearly premium of $280,645. But, because of increasing claims by and defects in the strata building identified in an expert report, CHU declined to re insure the strata building after 7 February 2024.

The strata building tried to find domestic strata building insurance without success. So, it widened its search for insurance overseas.

One London insurer offered insurance but only for $50 Million which wasn’t enough to replace the building in a worst case event. However, Lloyds of London [that well known global insurer of last resort] offered the strata building insurance cover for a yearly premium [including fees, taxes, charges and premium funding] of $1.2 Million.

The policy that was offered may not have been completely compliant with the requirements of sections 187 and 188 of the Body Corporate and Community Management (Accommodation Module] Regulation 2020, the premium was more than the strata committee is allowed to spend under section 162 of the Body Corporate and Community Management (Accommodation Module] Regulation 2020, and there wasn’t enough time to hold a strata owners’ meeting to approve it.

So, the strata committee applied to the BCCMA Comissioner for an order permitting it to insure the building under the Lloyd’s policy and pay the $1.2 Million premium.

In making its decision the BCCMA Adjudicator reviewed the Queensland strata law insurance provisions and its powers to make the requested order and concluded …

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Keywords

#QLD #BCCMAAdjudicator #insurance #premium #spending #committee #emergency #2024 #BCCA1997 #s243A #BCCM(Accom)R2020 #s162 #187 #188