These articles about Office Bearers Liability Insurance have been supplied by Todd Garsden of Hynes Legal and Tyrone Shandiman of Strata Insurance Solutions.
Question: Qualified non-committee lot owners have come forward to offer assistance and advice. We have been advised these owners are not covered by our office bearers liability policies. How can we fix this?
Our body corporate committee includes two people that have engineering qualifications. This is helpful when we seek quotations for maintenance work. They understand issues, can prepare a scope of works and supervise work. As committee members, they are covered by our public liability and office bearers insurance policies.
We also have owners that have relevant qualifications – builders, project management, engineering. These owners have come forward to offer assistance and advice. We have been advised that these owners are not covered by our policies. How can we fix this?
Answer: Firstly, check the policy wording in both the public liability section & office bearers liability section.
My first recommendation is to check the policy wording in both the public liability section & office bearers liability section for the definition of “you”, “insured”, “office bearer” etc.
Using the well-known strata insurer CHU’s policy wording as an example the definition of “You, Your, Yours” for the public liability section of the policy includes “a Voluntary Worker whilst engaged solely in work or duties on behalf of the Body Corporate, Corporation, Owners Corporation, Plan or Company named in the Schedule”.
Furthermore, with regard to the office bearers liability section “Office Bearer” includes “a person invited by an Office Bearer and/or committee member to assist in the management of the Body Corporate affairs”
So in both section of the CHU policy in the example provided by the questioner, the policy does extend to cover a volunteer/s invited by office bearers to assist in the management of body corporate affairs.
We recommend that the body corporate properly document the engagement of any volunteers (such as by way of minute or email) to ensure they can demonstrate to the insurer they were invited by the committee to assist in such work.
We also recommend reviewing the policy to ensure that the policy has a “Cross Liability” or “Joint Insured” clause which effectively allows one insured party to sue another insured party.
There are some pitfalls with using volunteers vs qualified professionals committees should consider.
When an insurer is presented a claim for a legal action, the first part of the assessment of the claim is to determine if the claim can be defended and if so at what cost. Office bearers and volunteers may have more protection from legal claims which can mean that the body corporate could be precluded from claiming against an office bearer/volunteer where they may otherwise have been able to do so with a professional who was paid to provide professional services.
Also a body corporate or owner may be less willing to legally pursue a volunteer who in good faith voluntarily provided a service to the body corporate, where they might otherwise have been more willing to consider a legal action against a professional who was engaged to provide a professional service and was paid for doing so.
This information is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. Shandit Pty Ltd T/as Strata Insurance Solutions strongly suggests that no person should act specifically on the basis of the information in this document, but should obtain appropriate professional advice based on their own personal circumstances. Shandit Pty Ltd T/As Strata Insurance Solutions is a Corporate Authorised Representative (No. 404246) of Insurance Advisernet Australia AFSL No 240549, ABN 15 003 886 687.
This post appears in Strata News #265.
Question: If an office bearer has legal action against them for a matter that relates to their representation of the body corporate, is the body corporate vicariously liable for the office bearer?
If an office bearer has legal action against them for a matter that relates to their representation of the body corporate, is the body corporate vicariously liable for the office bearer? For example, if an office bearer is sued for defamation for a statement they made while acting on behalf of the body corporate, can the office bearer say that the body corporate is vicariously liable and therefore is required to pay for the legal expenses and damages awarded to the plaintiff?
Answer: It may apply, but it is unlikely to ever get litigated to confirm the position given that there will be office bearer liability insurance.
As far as vicarious liability specifically goes – this is not something that has really been explored in the context of bodies corporate. It may apply, but it is unlikely to ever get litigated to confirm the position given that there will be office bearer insurance, specific statutory protections for committee members in the BCCMA and the ability of the body corporate to choose to cover the costs of the committee member (assuming that is a reasonable decision).
The other threshold issue though is whether what the committee member has done (which has potentially caused some form of liability) is actually within the scope of their role as a committee member.
It isn’t necessarily a clear answer (but it isn’t necessarily a clear area of law also).
This post appears in Strata News #225.
Understanding Office Bearers Liability Insurance
Office Bearers Liability Insurance provides cover for the Body Corporate’s Office Bearers should they become legally liable to pay compensation for any wrongful act they commit while carrying out the functions of their position. The policy is designed to cover costs related to damages, judgments, settlements and legal costs.
Notification of Claims
It is a condition under most office bearers liability policies that the insurer is notified of any potential claim immediately and during the policy period. Late notification of claims can result in a claim being denied or indemnity being reduced because:
- The insurer wants the right to manage the claim and minimise losses.
- Cover is offered on a ‘claims made’ basis and you must notify the insurer of any claims during the policy period (and up to any extended reporting periods as an additional benefit under the policy). In addition to this, before entering into any new contract including a renewal, you are required to notify the insure of any claims, facts or circumstances that could result in an Office Bearers Liability claim.
If you have any threats, notices or instances that could lead to an Office Bearers Liability claim it is always recommended you seek qualified insurance advice and notify the insurer irrespective of whether or not you think it may lead to an actual claim.
Insurers will usually reserve the right to appoint their chosen legal representative. In addition to this, most policies will have provisions that allow the insurer to take over and conduct in the office bearers name legal proceedings and the settlement of any claim. The insurer will be looking at the settlement of a claim predominantly from a financial perspective, with a view to minimising their loss. An office bearer may have other considerations that do not align with the insurers interest of minimising their loss (such as the reputational cost of a settlement offer).
Conflict between an insurer and office bearer can arise where the office bearer does not agree with the legal approach of the insurer. In such instances, it is important to have a proactive discussion with the insurer, as insurers can be amenable to altering their approach to a claim or settlement.
Where agreement cannot be reached, the policy does provide the insurer with the ability to stop paying legal costs and expenses if you do not agree to a reasonable settlement of the claim.
Below are common exclusions that can apply to Office Bearers Liability insurance:
- A claim made or notified outside the policy period;
- Fines & penalties imposed by law;
- Dishonest, fraudulent, criminal or malicious acts or omissions;
- Events where you were acting outside of your authority as an office bearer;
- Claims brought in a court of law outside Australia;
- Asbestos & Pollution;
- Intentional decision not to effect or maintain insurance in accordance with applicable strata legislation;
- A conflict of duty or interest;
- Gaining or having gained any personal profit or advantage to which You were not legally entitled;
- Moneys or gratuity given to you without authorisation by the Body Corporate where such authorisation is necessary or prescribed by law.
Office Bearers Liability policies will also have exclusions related to Personal Injury, Property Damage & Defamation, however, these claims in some instances can be dealt with under the public liability section of the strata insurance policy.
This information is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. Shandit Pty Ltd T/as Strata Insurance Solutions strongly suggests that no person should act specifically on the basis of the information in this document, but should obtain appropriate professional advice based on their own personal circumstances. This information is designed as a basic guide with relation to cover and you should refer to your Policy Schedule and Product Disclosure Statement for all terms and conditions related to cover under any insurance policy. Shandit Pty Ltd T/As Strata Insurance Solutions is a Corporate Authorised Representative (No. 404246) of Insurance Advisernet Australia AFSL No 240549, ABN 15 003 886 687.
This post appears in Strata News #181.
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