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Home » Insurance » Insurance QLD » QLD: Q&A Understanding Office Bearers Liability Insurance

QLD: Q&A Understanding Office Bearers Liability Insurance

Published March 5, 2018 By The LookUpStrata Team 4 Comments Last Updated March 31, 2022

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This article contains Q&As about Office Bearers Liability Insurance for a body corporate committee member.

According to Strata Community Association (NSW), here is the definition of Office Bearers Liability Insurance:

  • Compulsory insurance cover to provide compensation for alleged wrongful acts or decisions of the volunteer committee members. Details are found on the certificate of insurance and in the Product Disclosure Statement.

Table of Contents:

  • 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?
  • 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?
  • ARTICLE: Understanding Office Bearers Liability Insurance

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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 sections 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 that should consider.

When an insurer has presented a claim for 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 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.

Tyrone Shandiman
Strata Insurance Solutions
E: [email protected]
P: 07 3899 5129

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 Advisenent 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).

Frank Higginson
Email Hynes Legal
Visit the Hynes Legal Website

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.

Claims Consideration

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 insurer’s 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.

Common Exclusions

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.

Tyrone Shandiman
Strata Insurance Solutions
E: [email protected]
P: 07 3899 5129

This post appears in Strata News #181.

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 Advisenent Australia AFSL No 240549, ABN 15 003 886 687.

Have a question or something to add to the article? Leave a comment below.

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Comments

  1. John says

    May 26, 2020 at 10:47 am

    Hi
    Committee members have repeatedly made personal malicious and defamatory statements to an owner and others.. The owner is now threatening legal action and they are unrepentant stating that the owner had better have plenty of money as their (committee members) defence will be covered by the BC and its insurance.
    Is this the case – would the insurance cover their legal fees for the defence of personal attacks?

    Reply
    • Liza Admin says

      May 29, 2020 at 10:51 am

      Hi John

      The following response has been provided by Frank Higginson, Hynes Legal:

      It all depends on the policy. My experience has been that defamation is sometimes excluded form being an insured event, but it will all depend on what the policy conditions are.

      Reply
  2. Tyrone Shandiman, Strata Insurance Solutions says

    November 18, 2019 at 11:52 am

    Hi Michael

    1. Looking at one insurers policy wording that has this exclusion the wording of the exclusion is “We will not pay claims directly or indirectly arising from or in connection with pollution or contamination”. It does not elaborate on the type of pollution, however if a claim was specifically brought against an office bearer related to pollution from toxic fumes arising from cladding products the insurer may be at liberty to apply the exclusion;
    2.This is a good question and I think it deserves it’s own article with input from a solicitor. Some of my comments are: – Every claim presents a new set of circumstances and it is always difficult to advise on hypothetical matters as there are always other considerations.
    – The word “intentional” is an important consideration – it would imply that you were aware the property was not properly insured in accordance with the Act and the office bearer intentionally decided to insure the building otherwise.
    – There is no obligation under the act to insure loss of rent
    – While a solicitor would be best placed to give advice on “possible defences” some things we would recommend clients discuss with their solicitor are – firstly, owners vote to endorse insurance at their general meeting. Secondly, did the committee receive other professional advice with regard to the placement of insurance (such as from your strata manager or broker).

    Trust this answers your queries but you are welcome to call me if you want to discuss further.

    Tyrone Shandiman
    0419 012 262
    [email protected]
    http://www.stratainsurancesolutions.com.au

    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.

    Reply
  3. michael cretikos says

    November 18, 2019 at 10:09 am

    Hi Tyrone

    I have a couple of queries regarding common exclusions:
    1. asbestos and pollution – what type of pollution is this – could it also include toxic fumes arising from cladding products;
    2. Intentional decision not to effect or maintain insurance in accordance with applicable strata legislation – I have a case where our insurance was placed at the same amount as last year. I now see, after 6 months into the currency period, that rentals have increased substantially, by as much as $100 per week. This makes me wonder that we could now be under insured. As Strata committee treasurer, what defense would I have if losses were incurred due this supposed under insurance? One must bear in mind that the SSMA act 20-15 NSW states that the BSI has to be for at least the minimum amount for replacement. This amount, in the event of a declared catastrophe, will not be sufficient to replace the building and the strata committee could therefore have a claim against them by their OC. Where do I stand in such a case? The operable wording would be maintain insurance, possibly.

    Reply

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