Are there unknown contents being stored in garages on your strata? While a resident could be storing a friend’s business stock as a favour, if the contents are unknown they could pose a hazard and potentially lead to an uninsurable claim.
An interesting query regarding unknown business stock being kept in the garage of a residential strata building was sent into Whitbread recently. We have addressed this somewhat concerning issue below.
The question:
2 owners are allowing their garages to be used for storage and collection of unknown items for a friend’s business. How does this impact on our strata insurance and any hazards that may crop up? I have viewed many cardboard boxes taking up most of one garage!
(Question courtesy of Look Up Strata)
Whitbread’s response:
To answer this question in full, we must first explain Contents Insurance, and how the presence or absence of Contents Insurance held by the owners can impact the Strata Insurance, and other aspects relating to the property if there is a claim.
Please note: The answer to this question is based on the assumption that the garage is not part of a common area carpark, and is therefore considered part of the related strata unit.
Covered by Strata Insurance?
In the first instance, it is important to note that the damage/loss of these specific items would not be protected under a Strata Insurance policy.
Strata Insurance is designed to cover material damage as a result of an insured peril to the building and structural fixtures including fixed plant, machinery and underground services. It also covers appliances, equipment, furniture, fittings and works of art in any common area for which the Owners Corporation (OC) is responsible.
Contents Insurance
Much like a storage cage, in order to protect contents within a garage, the owner must take out a Contents Insurance policy. A Contents Insurance policy held by the owner is necessary to protect the items themselves, but also to protect the owner against liability exposures that may result from damage and/or injury incurred by third parties due to the items kept in the garage.
In this case, it is highly unlikely a Contents Insurance policy would automatically include cover for unknown / undisclosed items belonging to another party, particularly if stored in a garage. This may be the case for a number of reasons:
1. The insurer does not know about the boxes, or what they contain.
Before entering into a contract of general insurance with an insurer, the owner of the Strata unit has a duty under the Insurance Contracts Act 1984, to disclose to the insurer every matter that they know, or could reasonably be expected to know, is relevant to the insurer’s decision on whether to accept the risk of the insurance and, if so, on what terms.
The owner also has the same duty to disclose those matters to the insurer before they renew, extend, vary or reinstate a contract of general insurance.
Essentially, the owner has a duty to disclose to the insurer anything that may increase or change the risk at the property, for example, storing boxes for a friend’s business in their garage. Something like this could significantly increase the property’s risks, e.g. a fire. If changes like these are not disclosed on the insurance schedule and a claim is made, it is very likely the insurer would deny the claim.
Denial of a claim in such instances could be based on non-disclosure, particularly if the contents of the boxes are deemed hazardous and are outside the insurer’s underwriting guidelines. If that is the case, the owner would be exposed to the costs and legal outcomes associated with a claim if an incident occurred as a result of the boxes and/or their contents.
Conversely, if the insurer is informed of the boxes and their contents, and they have the opportunity to amend the policy in line with their risk appetite, a claim would most likely be covered by the insurance (subject to the terms and conditions of the policy wording).
2. The owner of the boxes will not be covered unless noted as an ‘interested party’ or a ‘named insured’ on the Contents Insurance policy.
In general, Contents Insurance policies will only cover items belonging to the ‘named insured’ as listed on the schedule of insurance. If the owner of the boxes wishes for their items to be covered by Contents Insurance, the individual must be noted as a ‘named insured’ or an ‘interested party’ on the policy, in addition to the policyholder.
3. Not all Contents Insurance policies automatically include cover for items in a storage cage or garage.
In order to make sure items in the garage are covered, it would be prudent for the insured to confirm this with the contents insurer in writing. All policies are different and many do not include Contents Insurance for items in a garage unless specified by the policy holder.
What is the potential impact on the Strata property and / or Strata Insurance?
If the items are not covered under a Contents Insurance policy, this could present a risk to the Strata property as a whole, particularly if the items are hazardous or highly flammable.
Contents Insurance covers liability for damage to third party property e.g. if a stored item caused a fire and damage to the Strata property, the OC could claim against the Contents Insurance policy to recoup the damages. However if there is no Contents Insurance in place, or if the Contents Insurance is voided due to non-disclosure to the insurer about the change in risk, the loss would need to be claimed against the Strata Insurance.
While it is likely Strata Insurance would cover the loss/damage, there could still be a variety of detrimental outcomes for the OC:
- The OC may be required to pay a policy excess
- The OC may experience a potential premium increase due to a change in the claims history
- The wellbeing of residents may be endangered if the boxes or their contents were found to cause a fire
- Residents and owners may suffer the inconvenience / stress of rebuilding or finding accommodation elsewhere if there was a catastrophic fire and the property became uninhabitable
For further advice on strata property insurance, please contact your Whitbread Strata Insurance Specialist or phone us on ph. 1300 424 627.
This insight article is not intended to be personal advice and you should not rely on it as a substitute for any form of personal advice. Please contact Whitbread Associates Pty Ltd ABN 69 005 490 228 Licence Number: 229092 trading as Whitbread Insurance Brokers for further information or refer to our website.
