Committee Member Liabilities – Are You Covered?
As a new or existing member of a body corporate committee, you probably have many questions you’d like to address, particularly when it comes to personal liability. A few of these questions could be:
- Can your decisions as a committee member result in legal action against you?
- Can the legal action threaten your personal income and assets?
- Is defending legal action very expensive and will it cause personal stress?
Case Study:
A lot owner in a townhouse complex asks their neighbor who is the body corporate Chairperson if they can replace their fence. The Chairperson agrees without considering the specification or consulting the rest of the committee and the lot owner proceeds to incur the expense of removing the old fence and installing a brand-new fence.
The body corporate committee disagrees with the Chairperson’s decision as the new fence is not the right height and does not fit within the complex’s aesthetics. The lot owner is then instructed by the committee to remove the fence and replace it with one consistent with the rest of the scheme. The lot owner is annoyed that he has had to incur additional costs to remove and replace the fence and decides to sue the Chairperson for the loss incurred due to his original decision made without any authority.
In Queensland there is legislation in place making it compulsory to insure your body corporate building against many events including fire & storm as well as ‘injury’ incidences on common property. Regrettably, it’s not ‘compulsory’ to protect those volunteers who give their time and energy forming the body corporate committee – however it is an ‘optional’ cover available through strata insurers called ‘Office Bearers Liability’.
If your strata scheme doesn’t have this cover, ask yourself why & what price do you put on ‘peace of mind’? If you do have this cover, check that it’s adequate as the legal cost to defend an action brought against you can enter into the tens of thousands each time. Regrettably many strata buildings have little or no cover. The national average sum insured is $1,000,000 for Office Bearers Liability cover and is often less than $400 per annum (including GST) extra premium. This is ‘small change’ when considering this cost is spread over the entire scheme and could be only $40 extra per lot (10 lot building) to $4 per lot extra (100 lot building). It’s recommended to consider more cover for the larger &/or more complicated strata schemes.
Once in place, this cover will ‘roll-over’ automatically each renewal, protecting those new members that join the committee. Insurers have ‘definitions’, ‘exclusions’ and ‘special conditions’ that are important when considering any type of insurance cover including Office Bearers Liability. One such exclusion: insurers will not cover claims arising out of a publication or utterance of a libel or slander or other defamatory or disparaging material.
It’s hard enough getting volunteers to join the committee, so make the easy choice and talk with a strata insurance professional. Your insurance agent should perform regular ‘health’ checks on your policy to make sure you have the right cover for your body corporate including Office Bearers Liability. If they don’t, please contact an agent that does.
This article was contributed by Mark McGuire of Marsh Advantage Insurance.
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Interested to know if Office Bearers liability would have provided cover in the case mentioned. As the Chairperson had made a unilateral decision rather than it being a Committee decision.
I have a further question please.
What liabilities are vested with a body corporate should the fabric of the structure become badly corroded with concrete cancer and potentially irreparable.
Thank you Patricia.
The Office Bearers Liability cover (if accepted and paid for) will provide cover for individual committee member/s and or the committee as a ‘whole’. It is best to refer to your insurer’s Product Disclosure Statement as each has their own ‘definitions’ and ‘exclusions’ per policy cover.
Thank you Andrew.
Strata insurance is not designed as a ‘maintenance’ policy and issues such as concrete cancer should be detected by regular checks and attended to as soon as possible. Insurers have many exclusions to their policies including: ‘lack of maintenance or failure to maintain the insured property in a reasonably good state of repair’.
We hope this helps with your query but if you have any further questions or would like assistance with your insurance needs please don’t hesitate to contact us.