This article about indemnity insurance meaning on a managing agency agreement has been supplied by Bailey Compton, Leverage Group – Solicitors & Academy.
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Everyone talks about being indemnified from loss. The property industry is no less indemnity focused than any other industry. Property managers rely on the fact that they are indemnified by the landlord against any injury that may occur to prospective tenants or tenants. Strata managing agents are buoyed by the thought that strata corporations indemnify them for every loss.
What does this mean? Does this mean that we are protected against all our actions? These indemnities are incredibly limited protection for strata managers and property managers.
Robinson vs Body Corporate Services 2004 considered the issue of indemnity of an owners corporation. Body Corporate Services were contract to administer Owners Strata Plan 1175. The lift was out of alignment. That is, when the lift stopped and the doors opened, the lift was higher than the floor outside.
The owners corporation had an elevator maintenance contract. They reported the problem and the maintenance people attended the site. Unfortunately, the part required to fix the elevator could not be found in Australia. The Strata Manager had ordered the part and was waiting for its delivery from overseas.
Whilst waiting for the part, signage was placed in the foyer, reminding people to be aware of the lifts as they were out of alignment. Mrs Robinson either ignored or didn’t see these signs and fell into the lift breaking her leg. There were complications which lead to considerable damage, which undoubtedly caused her some true loss.
At the district court level, the owners corporation was found responsible for her losses. The matter was appealed to the Supreme Court and the Supreme Court held that the owners corporation were not liable because they had done everything in their power necessary to affect the repairs to the lift. They also put signage outside as a means of preventing people from entering the lift without knowing about the unaligned elevator.
Thankfully, the owners corporation was found not to be liable. Obviously, considered in this case was the issue of the strata managing agent’s indemnity. The owners corporation indemnify the strata managing agent against all actions, claims or loss which occur in relation to the owners corporation.
The court clearly stated that, no indemnity can “protect a person against their own negligence”. In other words, the indemnity clause under any strata managing agency agreement or managing agency agreement, cannot protect the agent against their mistake. Hence, if a person suffers an injury due to the negligence of the agent, the agent is still responsible for the damages. For example, if a property manager is showing an open home and a person trips over a cable laying on the floor and suffers an injury, the property manager has breached their duty of care by not insuring a safe place for people to come into the house.
Property managers and strata managers have relied on these indemnities for a long time. The Robinson case clearly indicates that these indemnities only protect them against mistakes by the owners corporation or the landlord. They serve no protection to the strata manager or property manager for their own activities. Hence, the indemnity only protects you against the actions of others.
In short, the indemnity is not worth the paper it is written on. You may ask solicitors why they place indemnity in strata managing agency agreements and property managing agency agreements? It is simply this, by telling people the agent is not liable, people are less likely to go to solicitors to sue. It’s a smoke screen thrown up by lawyers but it does not protect the agent.
This post appears in Strata News #176.
Leverage Group – Solicitors & Academy
This article was published with the permission of the author and first appeared on Leverage Academy Website.