A case heading for the High Court is likely to provide a wake-up call for tens of thousands of apartment owners across the State.
Aviva Insurance Ireland is looking for court direction over claims relating to damage caused to apartment owners’ homes in the Creeslough in Donegal three years ago.
Vivo Shell, the company that owned the retail and residential complex, had insured the building for €1.7 million – a figure that is less than the bill for the damage caused in the gas explosion that killed 10 local people.
That has led to a dispute with the owners of the individual apartments.
Vivo Shell accepts that they are entitled to a share of the payout, but the apartment owners say that what they are being offered leaves them well out of pocket on the cost of reinstating their homes.
In the event of underinsurance – where a building is insured for less than its actual reinstatement value – an insurer will only pay out pro rata on any claim. So, if your home is insured for €200,000 but the rebuild costs are actually €400,000, the insurer will only pay out 50 per cent of any claim.
That applies whether the building is destroyed or simply in the event of a smaller claim for, say, flood damage. Even if your claim is less than the €200,000 valuation, you will only get half of what you claim.
It is a real issue for all apartment owners, most of whom are expected to take out insurance for their home contents, but who rely on block insurance taken out by the owners of the building or its management company.
In this case, the apartment owners will likely argue that the failure to insure the building against full reinstatement costs properly was not their error and that they are entitled to their full claim – presumably at the expense of Vivo Shell.
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How that plays out remains to be seen. Still, it is a timely reminder to all apartment owners to ensure that their management companies get regular valuations covering reinstatement costs and adjust block insurance cover to reflect the updated figures.
Building costs, like so many other things – food and medical expenses for instance – tend to run well in advance of the general rate of inflation, so implying indexing building cover to the consumer price index is unlikely to provide sufficient cover.
No one wants to pay more for their bills than they have to, and disputes between apartment owners and management companies are legion. But failure to pay the price to adequately protect your home could be disastrous financially if, and when, you need to make a claim.
