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Following is a question by the Hon Bernard Chan and a reply by the Secretary for Home Affairs, Mr David Lan, in the Legislative Council today (Wednesday):
Question¡G It was reported that the Administration was considering the introduction of a mandatory scheme to require building owners to take out third party insurance for their buildings to ensure that, in case accidents occur within the precincts of their buildings, the people affected by the accidents can be compensated. In this connection, will the Government inform this Council of the details of the scheme, the implementation timetable and the difficulties anticipated in implementing such a scheme¡H
Reply¡G
Madam President,
I would like to thank the Hon Bernard Chan for raising this question concerning third party insurance for buildings. My reply is as follows:
A Building Management (Amendment) Bill is being drafted and will be later submitted to this Council for consideration. One of the proposals in the Bill is to require an owners' corporation ("OC") to take out third party insurance in respect of the common parts of a building.
At present, an OC is authorized, under Section 18(2)(d) of the Building Management Ordinance (Cap.344), to exercise discretion to insure and keep insured the building or any part thereof to the reinstatement value thereof against fire and other risks. But Section 18(2)(d) is not mandatory. We know quite a number of OCs have not taken out insurance in respect of third party liabilities for the common parts of their buildings. In a case of claim for compensation last year, the court ordered the OC of a building in Mongkok to pay about $20 million to compensate a worker for injuries suffered when carrying out maintenance works for the building. There was widespread public concern about this case. We believe OCs should be required to take out third party insurance in respect of the common parts of their buildings so that in case accidents occur, the people affected by the accidents can be compensated.
We are now drafting the Building Management (Amendment) Bill which contains the following provisions on mandatory insurance¡J
(1) A corporation shall, on behalf of the corporation and the occupiers and owners of a building, procure and keep in force in relation to the building and all parts thereof including the common parts and the property of the building, such policy of insurance with an insurance company in respect of third party risks as complies with any requirement prescribed for the purposes of this section.
(2) In the event of a contravention of subsection (1), every member of the management committee shall be guilty of an offence and shall be liable on conviction to a fine at Level 5 unless he proves -
(a) that the offence was committed without his consent or connivance; and
(b) that he exercised all such due diligence to prevent the commission of the offence as he ought to have exercised in the circumstances.
Specific requirements concerning the insurance (e.g. scope of coverage, guaranteed amount of compensation and qualifications of insurers) will be stipulated in the subsidiary legislation to be enacted separately by the Chief Executive in Council under the Building Management Ordinance. OCs that fail, without reasonable cause, to take out third party insurance in respect of the common parts of their buildings as prescribed in the legislation shall be guilty of an offence and shall be liable on conviction to a fine at Level 5 (maximum fine of $50,000).
Regarding the implementation timetable, subject to approval of the Bill by the Legislative Council, we shall proceed to formulate the subsidiary legislation on the insurance requirements detailing the specific requirements in respect of the above for compliance by corporations. When formulating the subsidiary legislation, we shall fully consult the insurance industry, the property management sector, relevant professional bodies and Government Departments. We expect the subsidiary legislation to be ready for implementation in the 2000-2001 legislative session.
Taking account of the fact that some OCs may need time for preparation (e.g. to choose insurance companies, negotiate terms of the insurance policy with insurance companies, convene owners' meetings and carry out repair and improvement works), we are considering to allow, upon enactment of the subsidiary legislation, a grace period for OCs to comply with the requirements before the official enforcement of the Ordinance on mandatory insurance.
Regarding implementation difficulties, we anticipate that upon enforcement of the Ordinance on mandatory insurance, some buildings may be charged a higher premium due to various reasons, such as lack of proper maintenance and the existence of unauthorized structures. Some other buildings may be in such a dilapidated state that insurance companies are reluctant to negotiate insurance policies. Under such circumstances, owners should work together to step up restoration or improvement works and remove unauthorized structures in order to secure more favorable terms with insurance companies. Owners in need of technical assistance in respect of building maintenance and removal of unauthorized structures may approach the Government Departments concerned. In addition, seven professional bodies have assigned members to man the Building Management Resource Centre of the Home Affairs Department, offering preliminary professional advice and services to the public free of charge. Owners may seek information and assistance at the Centre.
Thank you, Madam President.
End/Wednesday, December 15, 1999
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