Ireland's Creeslough case serves as a warning for apartment owners nationwide

In the picturesque town of Creeslough, Donegal, a contentious issue has arisen between apartment owners and Vivo Shell, the company that owned the retail and residential complex. The crux of the matter is the insurance coverage for the building, which was insured for €1.7 million, significantly less than the bill for the damage caused by a gas explosion that claimed 10 local lives three years ago.

This unfortunate event has highlighted the importance of adequate insurance coverage for residential properties, a concern that is not unfamiliar to apartment owners. Disputes between apartment owners and management companies over insurance matters are, unfortunately, common. It is often recommended that apartment owners ensure their management companies get regular valuations covering reinstatement costs and adjust block insurance cover accordingly.

In the case of the Creeslough complex, Vivo Shell accepts that they are entitled to a share of the payout, but the apartment owners claim that what they are being offered leaves them well out of pocket. The outcome of this dispute is yet to be seen, but it could have far-reaching implications, potentially affecting tens of thousands of apartment owners across the State.

The rule of insurers paying out proportionally on claims applies to both large-scale destruction and smaller claims, such as flood damage. For instance, if a home is insured for €200,000 but the rebuild costs are actually €400,000, the insurer will only pay out 50% of any claim. In this specific case, the apartment owners may argue that the failure to insure the building for full reinstatement costs was not their error, and they are entitled to their full claim from Vivo Shell.

Aviva Insurance Ireland is seeking court direction over claims related to the damage caused to the apartment owners' homes. The management company that manages the residential and commercial complex, "The Creeslough Management Company," reviews the rebuilding costs annually. Regular valuations and adjustments to block insurance cover are crucial to ensure adequate protection for apartment owners.

Failure to pay enough to adequately protect a home could lead to financial disaster if a claim needs to be made. Building costs tend to increase faster than the general rate of inflation, so indexing building cover to the consumer price index may not provide sufficient coverage.

This incident serves as a stark reminder for apartment owners to be vigilant about their insurance coverage and to regularly review and adjust their policies to ensure they are adequately protected. It also underscores the importance of clear communication and fairness in managing insurance claims between property owners and management companies.