Concrete cancer epidemic—don’t bury your head in the sand
By: Tyrone Shandiman
November 24, 2015

Following a report from in the Courier Mail early 2015 which suggested there was an epidemic of concrete cancer in older buildings. Strata Insurance Solutions wanted to provide unit owners with more insight into how this matter is handled from an insurance perspective and also use the opportunity to warn bodies corporate not to bury their heads in the sand if they notice signs of concrete cancer.

Rust stains coming from concrete is a telling sign of concrete cancer, particularly when it is coming from an area near cracked concrete. Concrete cancer is caused when steel embedded in concrete starts to rust. This then causes the steel to expand to up to three times its original volume & crack the concrete, exposing more of the steel and concrete to the elements. Once water penetrates through cracked cement it then rusts and the steel embedded deeper in the cement is then exposed repeating the process until the building becomes structurally unsound.

painting over the problem

There are suggestions some Bodies Corporate [condo corporations] may be hiding telltale signs of concrete cancer by simply painting over the problem, because they are afraid it will reduce the value of their properties. Ignoring the concrete cancer only exacerbates the problem because the steel continues to expand and crack the cement, so buildings that are not willing to address the issue as soon as it is noticed are in for a raft of long term pain.

needs to be disclosed to insurers

Concrete cancer is classed as a building defect and therefore needs to be disclosed to insurers as part of your Duty of Disclosure. Failure to notify an insurer of a preexisting defect such as concrete cancer may mean that in certain circumstances the Insurer is entitled to avoid the contract altogether. Or the Insurer may be entitled to reduce the liability in respect of a claim to the amount that would place the insurer in a position in which the insurer would have been if the failure had not occurred or the misrepresentation had not been made.

“If a body corporate committee [board of directors] covers up or fails to disclose to an insurer the existence of concrete cancer and if, as a result of that, a claim on its insurance is denied, then potentially, the committee members may incur a liability for damages. The position varies slightly in each Australian jurisdiction. For example, in Queensland there is a statutory protection for committee members against civil liability provided the act or omission leading to the liability was done in good faith and without negligence. Where non-disclosure was deliberate, or even careless, that protection may not be available. The solution is to avoid risk and ensure proper disclosure is made.” Said Gary Bugden, Principal at Bugden Legal.

We have contacted a number of insurers to get their view on how they approach concrete cancer when it is disclosed to them. Some insurers decline the policy outright, while others will look at the issue on a case by case basis. Of the insurers that consider covering a building that has concrete cancer, overwhelmingly we are told they look more favourably at buildings who can demonstrate they are being proactive about addressing the issue.

Below are things Strata Insurance Solutions recommend Bodies Corporate prepare when disclosing concrete cancer to an Insurer:

Reports which outline the extent of the concrete cancer & the potential risks posed from its presence.

Engineering reports outlining the structural integrity of the building.

Plans the Body Corporate has around rectifying the problem, with timeframes. Insurers may consider agreeing to a reasonable time to raise funds on a case by case basis, provided the wait does not significantly increase the insurance risk to the insurer.

Long term plans of the Body Corporate to address the concrete cancer ongoing.

Addressing concrete cancer early, despite there being short term pain will benefit all unit owners in the long run. If unaddressed, concrete cancer can render buildings uninhabitable.

If your building has signs of concrete cancer and after getting advice from an engineer, we strongly recommend you seek further advice from your insurance broker or adviser about how to address this from an insurance perspective to ensure you are not exposing yourself down the track.

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