Strata Managers: Maintaining adequate cover in a landscape of increased liability
Flow on effect of defects rectification and cladding issues are becoming more problematic for Owners Corporations (OCs). OCs are becoming more reliant on Strata Managers (SMs) to manage these matters. As such, the scope of services being performed by SMs is widening and so too is their exposure to liability.
The Property, Stock and Business Agents Amendment (Professional Indemnity Insurance) Regulation 2012 (“the Regulations”) require SMs to hold professional indemnity cover of at least $1 million for any one claim and $3 million in aggregate, being for claims alleged against them during the period of insurance.
The Regulations also set out the minimum policy coverage requirements, covering “civil liability” (including for bodily injury) that arises from acts, errors or omissions of the SM’s services (including “vicarious liability” for others engaged by the SM). Indemnity available under the policy must include cover for negligence, misleading or deceptive conduct, breach of professional duty, unintentional defamation, fraud and dishonesty of employees and unintentional breach of third parties’ intellectual property.
We have observed that the breadth of SMs’ services are widening. SMs should check their policies to see if the professional services covered by their policies are sufficiently particularised. As regards policy limits, SMs should comply with the Regulations, but otherwise:
- The size of their portfolios and number and size of plans they manage.
- The scope of their service agreements with OCs.
- Consideration of the state of the building, cladding and defects issues and other projects.
- The nature of services they are providing to OCs. For instance is the SM itself getting involved in facilities management and remediation project management? If so, are these services captured in the definition of covered “professional services”?
- To what extent does the portfolio comprise plans that have been on-boarded from competitor SMs? What due diligence was done in the course of same? To what end are there any legacy issues? Has there been an audit ensuring that all information was transferred during the onboarding?
- Internal changes in staff at the SM in connection with allocated portfolios – is there adequate transitioning of plans to internal employees?
- Characterisation of the plan in respect of their sophistication, objectivity and fluidity generally as an Executive Committee.
- Characterisation of the members of the plans.
Simply put, compliance with the Regulations should be observed but will not offset any liability SMs may be exposed to with their increasing service offering.
For information and advice regarding Professional Indemnity insurance, contact a Bellrock broker via the form below.