An apartment owner who was required to pay a $10,000 excess for a water damage claim has lost his challenge against his insurer’s settlement offer, which he says is insufficient to complete repairs.

The owner lodged the claim as a beneficiary of the body corporate’s strata policy after a leaky pipe from the unit above caused water damage to the ceiling of his apartment in December 2021. 

AIG Australia accepted the claim and established an estimate for repair costs. However, a dispute arose after the complainant, the body corporate group, and the owner of the above unit refused to pay the policy excess.  

The insurer agreed to cash settle the claimant with a payment of $14,945.42, after imposing the policy excess, after the two parties signed a release form in August last year.  

But the complainant says the settlement amount had not been enough to complete the repairs to the building and that he should not have been liable to pay the excess because he was not responsible for the damage. 

He says the insurer should have conducted the necessary repairs and claimed the excess directly from the body corporate.  

However, the Australian Financial Complaints Authority (AFCA) says that the apartment owner was subject to the insurance contract’s terms and acknowledged the validity of the $10,000 excess.  

“Whilst the complainant says he was not at fault and should not have to pay the excess, responsibility for the loss is not a consideration under the policy,” AFCA said.  

It says determining which party was responsible for the payment was not a matter within the insurer’s control. 

“I empathise with the complainant’s position that the excess is a considerable amount, and he does not believe he should be liable for any costs,” AFCA said,  

“I acknowledge the excess may be paid by anyone insured under the policy (including the BC or the other unit owner), however the insurer does not have to power to compel its payment. Neither does AFCA.

“This is an issue he must resolve between himself, the BC and/or the other unit owner.” 

AFCA notes that the man has taken separate action against the body corporate in an effort to recover the excess. 

The ruling also disputes the owner’s contention that the settlement amount had been insufficient, noting that it had been based on a quoted price from a prepared scope of works from a repairer.

AFCA did require AIG Australia to add a 15% contingency, amounting to $3,741.81, based on the total repair cost, due to the possibility of unseen damage and additional work that may be needed. 

“Unless there is substantive additional damage found when the work is undertaken, the insurer is not required to pay any further amounts in relation to this complaint,” AFCA said. 

“If substantive additional work is required, the complainant may contact the insurer and have this reviewed.” 

The ruling did not require the insurer to cover a loss of rent incurred by the owner, who says he charged lower costs while the water issues were present. It says there had been limited evidence to show that the lesser fee had been provided or that the tenants had been “inconvenienced by the loss”. 

Click here for the ruling.