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17/04/2012 at 11:57 am #8082
At our AGM those on the EC asked if they were covered by insurance. I feel they may believe that no matter what they do (or don’t) do, no matter how they come to a decision (without taking into regard the consequences) that they will be covered and will not be out of pocket in any way.
So how much does office bearers insurance actually cover?
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17/04/2012 at 1:24 pm #15353
G’day Struggs – Our Legal Experts are no doubt better qualified than me to comment, but I’ve always operated under the assumption that Executive Committee Members are held to the same Common Law Standards as apply to Company Directors in terms of them performing their fiduciary duties in good faith, with due care, and a reasonable level of knowledge (given that if a Member is lacking in some knowledge, they have a responsibility to inform themselves before making a decision).
So under those Standards, I would expect that an EC Member who makes an honest mistake in the performance of their duties would have any resultant legal costs covered under their Plan’s Office Bearers Liability cover.
Again, I would not expect that any legal costs to defend a mistake by an EC Member that arose from intentional misconduct, negligence, or dishonesty would be covered, or that any awarded cost against the Owners Corporation would be covered no matter what the circumstance; honest mistake or otherwise.
17/04/2012 at 4:19 pm #15354@struggler said:
At our AGM those on the EC asked if they were covered by insurance. I feel they may believe that no matter what they do (or don’t) do, no matter how they come to a decision (without taking into regard the consequences) that they will be covered and will not be out of pocket in any way.Whale is right and the way “common law” manifest in these situations is in the principle of culpable negligence. To give a hypothetical example, a resident complains that a wall looks unsafe, the EC hire a builder to look at at and he says that not only is it unsafe, it’s dangerous but he can fix it for, say, $10K. The EC thinks $10K is way more than they are prepared to pay and instead decide to do nothing. Right there, they have not only breached their legal duty to maintain and repair common property, they have probably breached the terms of their insurance by deliberately and recklessly ignoring professional advice. If the wall falls down and injures someone, the individual EC members could be paying damages out of their own pockets. If the injured person is working in the building then under the terms of the Work Health Safety legislation, they could even go to jail.
Finally, many insurance policies specifically exclude matters such as defamation and libel. So they need to be careful about what they do (or don’t do) and say.
The opinions offered in these Forum posts and replies are not intended to be taken as legal advice. Readers with serious issues should consult experienced strata lawyers.
17/04/2012 at 10:43 pm #15355
@JimmyT said:…To give a hypothetical example, a resident complains that a wall looks unsafe, the EC hire a builder to look at at and he says that not only is it unsafe, it’s dangerous but he can fix it for, say, $10K. The EC thinks $10K is way more than they are prepared to pay and instead decide to do nothing. Right there, they have not only breached their legal duty to maintain and repair common property, they have probably breached the terms of their insurance by deliberately and recklessly ignoring professional advice. If the wall falls down and injures someone, the individual EC members could be paying damages out of their own pockets. If the injured person is working in the building then under the terms of the Work Health Safety legislation, they could even go to jail.
That is spookily close to the situation we had except that the EC decided we had to do something about the situation immediately and would spend that amount. Some owners objected to the spending. We asked in legal advice “What liability might we have been exposed to if we had not decided to act ASAP” The answer included a liability just for exposing people to a risk of serious harm; we would have been liable even if the wall did not fall down and no one was hurt. (the wall was holding up a roof BTW).
18/04/2012 at 2:41 pm #15359The OC could always pass a by-law to protect the EC.
This is the worst by-law my SP has.
CLAUSE 22 IndemnitiesTHAT every member for the time being of the Executive Committee of the owners corporation shall be indemnified by the owners corporation out of its funds and assets against personal liability for the acts, receipts, neglects or defaults of any other member of the Executive Committee or of any managing agent or for any loss or liability occasioned to the owners corporation by any error of judgement or oversight on his part or for any loss, damage or misfortune whatever which shall happen during the course of the execution of the duties of his office or in relation thereto AND shall be further indemnified in similar manner against any liability incurred by him in defending any proceedings, whether criminal or civil, in respect of any such act, receipt, neglect, default, error or oversight to the extent that Effective office bearers indemnity insurance covers members of the executive committee of SP*****.
I have tried to have this by-law removed, it failed unanimously because i am the one submitting the motion to delete the by-law and the owners do not realize how their funds and assets are backing the EC; that is if the by-law stood up if required. This OC is happy to vote down any motion to get a WHS report – that is due diligence where i come from.
The owners in my SP are constantly exposed to potential liabilities that they need not be exposed to — but they also live in a world where ignorance is bliss and live with the belief that it won’t happen to them.
We do from time to time have Office Bearers insurance as the Secretary just throws it in with a motion for the compulsory insurances at the AGM and the poor naive owners just pass the motion not realizing Office Bearers insurance should be its own motion.
If the Office Bearers insurance policy fails then I can assure you that the members of my EC would say the by-law applies and want to start using OC funds and assets to cover themselves.
19/04/2012 at 9:58 am #15367The last thing this SP needs is a by law to protect those are on the EC now. They already don’t get around to doing anything, believing they will be covered.
I know of a case of wood rot, brought to the EC’s attention in February. The owner of the unit was told that they would carry out an inspection to see if it was termite related. Nothing. No word as to whether this was carried out, whether they found termites or whether it is just wood rot. And no repairs have been carried out on this wood rot.
I know of owners who would like to sell but are loathe to as the place now badly needs word done that may not be attended to in the near future as the EC doesn’t get around to these matters and as they have given the SM their notice, they won’t be too interested I am sure of doing a diligent job. And there is another matter for the EC to attend to – finding a new SM. Just what this EP needs – something else to add to the every growing list of things to do.
But I fear our EC believes they are covered no matter what.
02/05/2012 at 12:28 pm #15451@Billen Ben said:
The OC could always pass a by-law to protect the EC.This is the worst by-law my SP has.
CLAUSE 22 IndemnitiesTHAT every member for the time being of the Executive Committee of the owners corporation shall be indemnified by the owners corporation out of its funds and assets against personal liability for the acts, receipts, neglects or defaults of any other member of the Executive Committee or of any managing agent or for any loss or liability occasioned to the owners corporation by any error of judgement or oversight on his part or for any loss, damage or misfortune whatever which shall happen during the course of the execution of the duties of his office or in relation thereto AND shall be further indemnified in similar manner against any liability incurred by him in defending any proceedings, whether criminal or civil, in respect of any such act, receipt, neglect, default, error or oversight to the extent that Effective office bearers indemnity insurance covers members of the executive committee of SP*****.
I think that there is a layering of laws here… Like a deck of cards, with the upper cards taking precedence. Anything written in a by-law means diddly squat if a council law overules it. Likewise, state law (the NSW strata management Act for exampe) trumps council law, federal trumps state and common trumps federal.
(I might be mixing up a couple of them)
Either way, no by-law means anything if common law says that if you knew that something was dangerous, had an obligation to address it as an EC member and did nothing… you are accountable, and can go to prison for it! Your owners should be made aware of that, or you should at least be getting your requests for axction minuted in ECM’s so that you are in the clear?
And maybe you should be showing them the exclusion clauses in your insurance policies to cement the info in their minds. Get that minuted as well, clearly explaining that they are personally accountable if they breach OH&S/SMA/Common law rulings and laws… Once that is minuted and documented, you may see a miraculous change of attitude… It happened with our EC when I pointed out that if they proceeded with their lack of action on a safety issue, and an accident ensued resulting in a $5 million law suit, that they would be both uninsured and held personally liable for the suit…
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