Body Corporate Insurance: Who Pays the Excess, and How Is It Set?

An excess is the amount paid towards an insurance claim by the body corporate, a lot owner or, in some cases, a third party. In Queensland, who pays the body corporate insurance excess depends on what was damaged, what caused the damage, who was responsible for maintaining the area and what is reasonable in the circumstances. The number of lots affected is only the starting point. What caused the damage, and who is responsible for maintaining the cause, usually matters most.

At Stratacare, excess is one of the insurance questions we’re asked about most. This guide explains how the excess is set, why different sections of a policy may carry different excesses, how responsibility is assessed and what you can do if you disagree. If you’re new to how strata insurance works, our article on who does what in body corporate insurance is a good place to start.

How is the body corporate insurance excess set?

The excess is agreed when the body corporate’s policy is placed or renewed. Insurers offer cover with one or more excess options, and the body corporate decides which to accept. The options available can depend on the building’s claims history, its age, location and condition, and its exposure to weather events such as storms, flooding and cyclones.

A higher excess can sometimes be chosen in exchange for a lower premium, but that isn’t always the reason an excess is high. Where a scheme has a significant claims history or a higher risk profile, the insurer may impose a higher excess, and the body corporate may have to bear it if the insurer won’t change it at renewal.

Your broker can seek renewal terms from several insurers, and these may come with different excess options. The chosen insurer may also consider a lower premium for a higher excess if the body corporate asks. Before doing so, the committee should be confident the excess won’t place a financial burden on owners when a claim is made.

A higher excess that is still manageable can also protect the body corporate. It discourages frequent small claims, which can affect future premiums and excess options. The right balance depends on the scheme’s finances, its claims pattern and how much risk is reasonable to pass on to individual owners. We encourage committees to compare options across the market at renewal. An experienced strata insurance broker can make this process far simpler.

Can different parts of the policy have different excesses?

Yes. A body corporate policy is made up of several sections, such as building and common property, public liability, office bearers’ liability, voluntary workers and machinery breakdown. Each section may carry its own excess.

Certain events can also attract a different or higher excess than the standard amount. Water damage, storm and flood are common examples. The excess that applies to a claim depends on which section of the policy responds and what caused the loss, so it may not be the headline figure on the certificate of currency. Reviewing the body corporate insurance excess across every section at renewal helps avoid surprises when a claim is made.

Who pays the body corporate insurance excess in Queensland?

The body corporate must insure certain buildings, common property and body corporate assets. The policy can include a body corporate insurance excess, but the arrangements for paying it must not impose an unreasonable burden on individual lot owners. This applies to how the excess is allocated, not to the amount. Where an insurer imposes a high excess because of claims history or risk, it still has to be paid.

The excess may be payable by the body corporate, a lot owner or a third party, depending on the cause of the damage and who is responsible for it. A leak from something within a lot that the owner is responsible for maintaining is an example where the owner would normally pay the excess, although the circumstances and the applicable legislation still need to be considered. You can read more in our body corporate insurance factsheet.

What factors decide who pays the body corporate insurance excess?

The committee should look at the facts of the claim. This includes where the damage occurred and where its cause was located, and whether one lot, several lots or common property was affected. It also includes who was responsible for maintaining the cause of the damage, what the policy says about the claim and excess, and whether requiring a particular owner to pay would be unreasonable.

The survey plan and the regulation module help identify the boundaries of the lots and common property, and who must maintain each area. If a failure to maintain common property caused the damage, the body corporate may pay the excess. If the cause was something a lot owner must maintain, it may be reasonable for that owner to pay. Maintenance responsibility is a key factor, but the committee still needs to consider all the circumstances before deciding who pays.

What happens when one lot, several lots or common property are damaged?

The following positions are a starting point rather than automatic legal outcomes.

Where only one lot is affected, the owner should pay the excess unless the body corporate decides that would be unreasonable in all the circumstances. Where two or more lots are affected, the body corporate should pay unless it reasonably allocates all or part of the excess to one or more affected owners. Where both lots and common property are affected, the body corporate should generally pay. The exception is where it reasonably decides the excess should be paid by affected owners, shared between owners and the body corporate, or allocated in another reasonable way.

The cause can change the outcome. If a leak comes from something within a lot that the owner must maintain, and it damages several lots or both lots and common property, it would generally be reasonable for the body corporate to decide that owner pays the excess. Equally, an owner whose lot is the only one damaged won’t always pay, for example where the cause is something the body corporate must maintain.

The same applies to common property. If it is damaged by a lot owner, resident or invitee, accidentally or otherwise, the excess would normally be recovered from the person responsible. The body corporate would bear it only if that recovery was unsuccessful.

When is the body corporate responsible for the excess?

The body corporate will generally be responsible where the damage came from a source it must maintain, such as a failure to maintain common property. A body corporate must keep common property in good condition and, where it is structural, in a structurally sound condition.

The reverse can also apply. An owner may be liable where failure to maintain their lot causes damage to another lot or common property. In either case, the committee still needs to evaluate the facts and decide whether the proposed allocation is reasonable.

How should the committee decide what is reasonable?

The committee should gather relevant information before deciding. This may include the insurance claim, photographs, maintenance records, reports, correspondence and information about where the damage started. Expert advice may help where the cause of the damage or maintenance responsibility is unclear, but it won’t be necessary for every claim.

The decision should have a reasonable evidentiary basis and be consistent with the survey plan and regulation module. It should also be objective rather than based on personal opinion, and accurately documented with the reasons behind it.

A well-prepared claim makes this much easier. When it’s clear from the outset which section of the policy applies and which excess is payable, committees are better placed to make fair decisions. This is an area where specialist broker support can make a real difference. For more on maintenance responsibilities, see our body corporate maintenance factsheet.

What can you do if you disagree with an excess decision?

If you believe it would be unreasonable for you to pay the excess, explain your reasons to the committee in writing and include any information that supports your position.

Self-resolution should be attempted first. This may involve writing to the other party or presenting a motion to the committee or a general meeting. If the disagreement can’t be resolved, it can proceed through the Commissioner’s dispute-resolution process. For most bodies corporate regulated under the BCCM Act, conciliation is the compulsory first step, and you must show you tried to resolve the issue yourself before applying. Our article on resolving disputes in a body corporate community has practical guidance.

Body corporate insurance excess FAQs

Does the owner always pay the excess for a leak?No. It depends on the cause and who is responsible for maintaining it. If the leak comes from something the owner must maintain, the owner would normally pay, even where other lots or common property are damaged, provided the body corporate’s decision is reasonable. If the cause is something the body corporate maintains, the body corporate would normally pay.

Why is my body corporate insurance excess higher than the standard excess?Different sections of the policy, and certain types of events such as water damage, storm or flood, may carry their own excess. The excess that applies depends on which section responds to the claim. An insurer may also impose a higher excess because of the scheme’s claims history or risk.

Can the body corporate choose a lower excess?The body corporate chooses from the excess options offered by insurers at placement or renewal.

Is it worth claiming if the repair cost is close to the excess?Often not, since claims can affect future premiums and excess options. Withdrawn claims still need to be disclosed at renewal, so it’s worth getting advice before lodging a small claim.

Can a third party be asked to pay the excess? Yes. Where a lot owner, resident, invitee or another party caused the damage, the body corporate may seek to recover the excess from them. If recovery is unsuccessful, the body corporate may need to bear it.

For more common misunderstandings, read our article on myths about body corporate insurance.

Need help with body corporate insurance?

How much the excess is depends on the policy, the scheme’s claims history and risk, and different sections may carry different excesses. Who pays depends on the cause of the damage, who is responsible for maintaining it, the regulation module and what is reasonable in the circumstances. If you have questions about your scheme’s body corporate insurance excess or broader cover options, contact Stratacare through our contact page.

This information is general in nature and does not take into account your objectives, financial situation or needs.