Strata Insurance – Strata managing agents’ engagement of insurance brokers
Posted 02 November 2016
Category: Strata Insurance
This fact sheet provides guidance in relation to the appointment by a strata managing agent of an insurance broker on behalf of one or more owners corporation clients.
This assumes the following typical scenario:
- The strata managing agent has been appointed by the owners corporation client by means of an agency agreement compliant with the legislation.
- The agency agreement delegates to the agent the function of arranging insurance cover for the owners corporation.
- The agency agreement authorises the agent to receive insurance commissions, disclosed to the owners corporation, payable by the insurer.
- The agent will engage an insurance broker on behalf of the owners corporation on the basis that insurance proposed by the broker will require approval by the owners corporation.
Can the strata managing agent effect insurance cover itself?
Possibly yes, but it is inadvisable, as it may expose the agent to claims. It is common to authorise the agent to arrange insurance cover for the scheme, but this is typically subject to limitations, such as the requirement of approval by the scheme. It would be preferable for such decisions to be referred to an AGM.
Can the strata managing agent appoint an insurance broker itself?
Normally yes, depending on the scope of the agentās delegated authority. However, it would be advisable for the agreement be approved by the strata committee.
Can the broker be appointed as broker for all owners corporation clients of a particular strata managing agent?
Normally yes. Again, it would be advisable for the agentās entry into the agreement be approved by the strata committee.
What action does the agent need to take?
The agent should:
- Ensure that its agency agreements contain requisite disclosures of anticipated insurance commission income and authority to receive such commission income.
- Obtain owners corporation approval of the agreement appointing the broker. Unless the owners corporation has reserved such decisions to itself, the approval of the strata committee would be sufficient.
- Obtain owners corporation approval prior to effecting insurance policies through the broker. Again, unless the owners corporation has reserved such decisions to itself, the approval of the strata committee would be sufficient.
***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.
