CHU and SUU Special Benefits - Legal Defence Costs

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.
  1. Managing agent liaises with the executive committee to determine whether to obtain specialist legal representation for the dispute.
  1. The managing agent seeks a legal services fee proposal, which ideally details the prospects of success, the steps required, and an estimate of fees.
  1. The managing agent submits a claim to the insurer and provides further particulars as the insurer requires to process the claim.
  1. 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

Name of insurer and type of plan Amount of cover*

Residential / Commercial

Type of claims included Special comments

CHU

 

Residential strata insurance plan

 

Commercial strata insurance plan

Typically $50,000

Residential

 

Residential and commercial components of mixed use and commercial schemes

Damages claims

Arbitration

OFT & CTTT mediations

CTTT proceedings
Are pre-commencement costs covered?

The policy covers Legal Defence Expenses incurred with the insurer’s consent in connection with litigation arising out of a Claim. Claim is defined broadly and includes a written or verbal advice of intent to initiate legal proceedings or a civil or criminal action.

 

Expert witnesses costs

Expressly included.

 

Are CTTT mediation costs covered?

Subject to consent being provided for cover for the Claim.

 

Choice of solicitor

The policy does not give the insurer a choice of solicitor or express approval rights.

 

Appeals

If unsuccessful in defending legal proceedings, the insurer will pay for an appeal, but only if the insurer is dissatisfied with the decision of the Court or Tribunal.

 

SUU – Residential Strata Insurance

 

Typically

$50,000

Residential schemes and also mixed use schemes with less than 20% commercial use. **

Damages claims

Arbitration

OFT & CTTT mediations

CTTT proceedings

Are pre-commencement costs covered?

The Policy provides cover for Legal Expenses which the insured is liable to pay following legal proceedings brought against it. Thus pre-commencement costs may not be covered.

 

Expert witnesses costs

Not expressly covered, however, may be covered provided the cost is a legal disbursement reasonably and necessarily incurred in connection with a claim.

 

Are CTTT mediation costs covered?

Not unless legal proceedings follow.

 

Choice of solicitor

The policy does not give the insurer a choice of solicitor or express approval rights.

 

Appeals

If unsuccessful in defending legal proceedings, the insurer will pay for one appeal, but only if the insurer considers that there are reasonable prospects of success.

SUU – Commercial Strata Insurance

N/A

Commercial, and also mixed use schemes with more than 20% commercial use. **

N/A

No applicable cover under this policy

 

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

  1. Defamation;
  1. Deliberate acts, such as fraud or dishonesty; and
  1. 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.

 

Prepared by Bannermans Lawyers

2 March 2012

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For more information on this topic or any legal enquiries please contact your Insurance Team.

     
         

 

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