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Why am I paying Body Corporate insurance, if it doesn’t cover me?

Insights for consumers

If you are paying for insurance through your Body Corporate and you are not sure what that insurance covers, or how or when that cover applies, you should discuss this with your Body Corporate.

Although the policy Franklin was claiming under did cover legal costs, it only covered legal costs incurred in certain circumstances – when they were incurred by the Body Corporate itself, or by an elected official or committee member in carrying out actions on behalf of the Body Corporate. The scope of the cover was limited to what was set out in the policy, and it could not be extended to include Franklin’s personal legal costs just because Franklin had been paying Body Corporate levies.

What happened?

Franklin and his business owned several units at a property. The Body Corporate for Franklin’s property held various insurance policies with an insurer, including a statutory liability policy, which included cover for defence (legal) costs.

For a period prior to 2019, Franklin rented out his units out as a boarding house. Franklin’s local Council later charged him for unlawful use, and Franklin spent about five years in legal proceedings defending the use of his property.

In 2024, Franklin found out that the Body Corporate held a statutory liability policy and he made a claim for the $300,000 in legal costs that he had incurred. The insurer declined Franklin’s claim.

Franklin complained to FSCL.

What were the parties’ views?

The insurer’s view was that the statutory liability policy did not respond to Franklin’s claim for legal costs. This was because the policy was designed to cover actions of the Body Corporate, or the Body Corporate’s committee or elected officials, not costs incurred in relation to a unit owner’s individual use of their land.

Franklin explained that he did not understand why his claim was being declined when he was the person who was paying for the policy via his Body Corporate levies, so he should have the cover. Franklin referred to various sections of the Unit Titles Act 2010, explaining that the Act supported his view that he was an ‘insured’ person under the Body Corporate’s policy.

What was FSCL’s view?

After reviewing the policy, we agreed with the insurer’s interpretation.

The policy stated that:

“The insurer will pay on behalf of the insured in accordance with the terms and conditions of this policy any…. Defence costs”.

‘Insured’ was then defined as the Body Corporate and ‘insured persons’ was defined to include individuals who were acting for or on behalf of the Body Corporate.

Because Franklin’s legal costs had been incurred personally, due to his decision to use his property as a boarding house, which was unrelated to the Body Corporate, we agreed that Franklin did not fall within the definition of an insured or insured person under the policy. The sections of the Unit Titles Act that Franklin referred to did not change our view. This meant that Franklin did not have cover under the policy, and the insurer was correct to decline his claim.

What was the outcome of FSCL’s investigation?

We issued a decision explaining our view to Franklin, and we closed our file.

* Names have been changed. Our case studies are brief summaries of our more detailed case notes from our investigations. For more information on this case, contact .