Question: The strata where I live is having a problem. It is proving very difficult to collect premiums for the strata insurance policy. Some owners say that the Strata Act specifies that every strata (sic) must be insured for its full replacement value. Others say this is untrue. Is strata insurance required by law? Those of us who believe that insurance is compulsory feel that if a single owner desires insurance, the strata company must comply and insure the premises. Can you please share any information that you may have on this subject?
- W.D., St. Andrew.
Answer: Lot owners of strata plans [to use the language in The Registration (Strata Titles) Act, 1969] (or condominiums as they are also called) and those who own/operate motor vehicles on public roads share one thing in common. Our law makers, acting in the best interests of the society, decided long ago that these groups must have insurance - no if, no but, or maybe. The doubters in your strata plan will not accept this opinion without a fight, merely on my say so. I plan therefore to try for a third round knockout!
Ignorance of the law is no excuse especially when information is a just few clicks away. Point your Internet browser to: http://www.moj.gov.jm/law/search. This is the website for the Ministry of Justice. Follow the instructions there to access the act. It is located under number 18 of the section headed "Page navigation." Section 5. - (1) states: "The duties of the (strata) corporation shall include the following:
(a) to insure and keep insured the building to the replacement value thereof against fire, earthquake, hurricane and other risks as may be prescribed, unless the proprietors by unanimous resolution otherwise determine;" (End of round 1).
MAIN DUTY
The main duty of the strata corporation is to effect insurance. This opinion was expressed by attorney-at-law and insurance law expert, Trevor O. Patterson in a paper entitled "Legal Problems of Insurance on Strata Lots." The issues you raised concern matters of law. The views of lay persons like you and me do not carry much weight in these matters. Those owners who contend that insurance is not mandatory are ignorant of the law! (End of round 2).
If it is proving so hard to collect insurance premiums, imagine the scale of the problem if the buildings on the strata lot were to suffer millions of dollars in damage. Mr. Patterson says that severe problems would arise if some owners insure and others did not. As an example, he cites the case of two adjoining lots (numbered 5 and 6) located on the third floor of a building that were damaged by fire. Lot 5 was insured. Lot 6 was not. Owner 5 is ready, willing and able to use his insurance proceeds to repair his unit. Owner 6 is not so inclined. Owner 5 may have to replace the party wall which divides the two lots. In doing so, he commits a trespass (causing damage, no matter how slight, to another's property) on lot 6. By paying to replace the party wall in which he only has half an interest, the insurance money of owner 5 runs out. His sum insured did not include the cost of replacing the entire wall. "In any event, even if owner 5 repairs his unit, he still has a burnt-out apartment beside him." Each lot owner would be affected by that. In order to avoid those problems, according to the attorney, Parliament "created a legal entity called the Strata Corporation and imposed a statutory duty upon the corporation to effect insurance " (End of fight).
The dispute about insurance and the non-collection of premiums are, in my opinion, symptoms of the problems facing the executive committee of your strata corporation. The leadership seems to be ignorant of its duties. Contact other strata corporations that have similar problems. Get help from an attorney. These actions could benefit you and your colleagues in resolving some of the problems. (By the way: if the doubters want another shot at my title, I'll give them space in my next article to explain why).
Cedric E. Stephens provides independent information and advice about the management of risks and insurance. If you need free information or counsel to help you solve a problem write to The Financial Editor or contact Mr. Stephens directly at aegis@cwjamaica.com.
