CHU and SUU Special Benefits – Legal defence costs

Posted 02 March 2012

Category: Strata Insurance

CHU and Strata Unit Underwriters (SUU) provide legal defence cover for defending claims from third parties (like owners or contractors) in addition to the cover provided for legal expenses for the more usual categories of insurance covered by a strata policy.

The cover varies between CHU and SUU. This article discusses the typical notifications and claims process for such legal expense covers and explores some of the variations in the cover provided.

The usual process of making a claim upon legal defence cover involves:

1. The managing agent receives correspondence relevant to the threat of proceedings, or actual proceedings. This could be a letter of demand, service of a request for mediation, or of tribunal or court proceedings. The managing agent must notify the insurer in accordance with the terms of the policy.

2. Managing agent liaises with the executive committee to determine whether to obtain specialist legal representation for the dispute.

3. The managing agent seeks a legal services fee proposal, which ideally details the prospects of success, the steps required, and an estimate of fees.

4. The managing agent submits a claim to the insurer and provides further particulars as the insurer requires to process the claim.

5. In our experience the insurer is usually not in a position to assess a claim before any legal steps are required, and the consent of the insurer should then be sought to proceed with the legal steps required while the insurance claim is being determined.

The table below sets out some of the differences between the insurance policies that provide this cover.

Summary of key points and differences

All policies have a range of exclusions, including (but not limited to):

1. Defamation;

2. Deliberate acts, such as fraud or dishonesty; and

3. Costs and expenses where you have not sought the insurer’s consent.

* Or as stated on the policy schedule. This limit is usually a cap on any individual claim, and the aggregate of all claims in a policy period.

** Where a scheme has exactly 20% commercial and 80% residential, the insurer will assess on a case by case basis     whether to insure under the commercial or residential policy.

***Disclaimers:

• This article does not cover insurance policies for other group title structures such as community title, company title or other types of group title.

• Please note this article only summarises some limited aspects of the legal defence cover. For full policy conditions, exclusions and definitions please refer to the Insurer’s Product Disclosure Statement.

• An owners corporation may have negotiated its own product, or product terms, which may differ from this summary.

• Insurance companies regularly amend and update the insurance terms and conditions. This article only comments on the insurance policies usual terms as at the 15 February 2012.

• Please note that there is a statutory obligation to advise the insurer, when taking out or renewing a policy, of any potential claims that may be made or circumstances that may lead to a claim. Most insurance policies also contractually impose this obligation on the insured. Failing to comply may result in insurance cover not applying to costs arising from matters that should have been notified to the insurer.

• Levels of cover stated were effective for new policies as at 15 February 2012.

***The information contained in this article is general information only and not legal advice. The currency, accuracy and completeness of this article (and its contents) should be checked by obtaining independent legal advice before you take any action or otherwise rely upon its contents in any way.