Insurance Payout Must be Handed Over to Strata Owner

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

GoStrata’s CaseWatch is a short, sharp and easy-to-understand review of important and interesting Court and Tribunal decisions affecting Australian strata title stakeholders.

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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.

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Implications

The key implications of this strata case are as follows.

• 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.