What Is Liability Insurance?

Liability insurance protects the body corporate and its committee members from financial loss arising from legal claims. Under the Unit Titles Act 2010 Section 135(1)(a), the body corporate must "take out any other insurance it is required by law to take out." While liability cover is not explicitly named in the Act, it is considered essential given the body corporate's legal exposure as occupier of common property and as an entity that owes a duty of care to those who use it.

A body corporate faces legal exposure from multiple directions — visitors injured on common property, tradespeople working on site, neighbours affected by the property, and even decisions made by committee members in administering the body corporate. Liability insurance addresses these risks across three main cover types.

Unit Titles Act 2010

The Unit Titles Act 2010 governs body corporates in New Zealand and sets out their obligations, including insurance requirements. Your adviser can help you understand how these obligations apply to your specific body corporate.

1. Public Liability Insurance

Public liability insurance covers claims from bodily injury or property damage suffered by third parties on or arising from the body corporate's common property. The body corporate, as the occupier of common areas, owes a duty of care to visitors, residents, and others who use those areas.

What It Covers

Common situations that may give rise to a public liability claim include:

  • A visitor slipping on a communally maintained path or in a lobby
  • A tradesperson injured while working on site
  • Someone injured using shared facilities such as a pool, gym, or lift
  • Damage to a neighbouring property caused by the body corporate's property

Cover Limits

Typical public liability cover for body corporates ranges from $1 million to $5 million. The appropriate limit depends on the nature and size of your property, the facilities present, and the number of people using the common areas. Your adviser can help assess what level of cover is appropriate for your building.

Common Areas Are Your Responsibility

The body corporate is responsible for the condition of all common property — stairwells, lobbies, car parks, gardens, pools, and lifts. If someone is injured in these areas due to a condition the body corporate failed to address, a claim could be made against the body corporate directly.

2. Statutory Liability Insurance

Statutory liability insurance covers fines and legal defence costs arising from unintentional breaches of certain legislation. Body corporates, as entities that manage property and engage contractors, can face obligations under a range of statutes.

Legislation That May Apply

Legislation Relevance to Body Corporates
Health and Safety at Work Act 2015 Body corporates may be PCBUs (Persons Conducting a Business or Undertaking) in some circumstances, with obligations around contractor safety on common property
Resource Management Act Environmental obligations relating to the property
Building Act 2004 Building compliance obligations for the building and common areas

Unintentional Breaches Only

Statutory liability insurance covers fines arising from unintentional or inadvertent breaches — not deliberate non-compliance. Whether this cover is appropriate for your body corporate depends on your specific circumstances. Speak with your adviser to assess your exposure.

3. Committee (Officers) Liability Insurance

Committee liability insurance — also called directors and officers (D&O) liability insurance — covers committee members personally for claims arising from their decisions and actions in administering the body corporate. Without this cover, committee members can face personal financial exposure.

What It Covers

  • Wrongful acts, errors, or omissions in the administration of the body corporate
  • Failure to arrange adequate insurance
  • Decisions that are challenged by unit owners
  • Legal defence costs associated with covered claims

Personal Exposure Without Cover

Committee members serve voluntarily and are making decisions that affect all unit owners. If a committee member is found personally liable for a decision made on behalf of the body corporate, they may face claims against their personal assets without committee liability insurance in place.

Who Is Covered

Committee liability insurance typically covers current and past committee members for claims arising from their roles. This is important because claims may arise some time after a decision was made, including after a person has left the committee.

Example: Failure to Insure

A committee fails to renew the body corporate's insurance policy on time. A fire occurs during the lapse in cover. Unit owners suffer uninsured losses and bring a claim against the committee members personally. Committee liability insurance would cover the committee members' legal defence costs and any damages awarded in this type of scenario.

This is an illustrative example only, not a representation of any actual claim outcome.

Additional Coverages in Body Corporate Packages

Specialist body corporate insurance packages may also include coverages that complement the three core liability covers:

  • Fidelity / crime coverage — covers theft of body corporate funds by officers or managers
  • Loss of rent protection — covers lost rental income where units become uninhabitable following an insured event
  • Common area contents — covers furniture, equipment, and other contents in shared areas

Package Policies

Many specialist body corporate insurers bundle liability covers together with property cover in a single package policy. Review your current policy schedule carefully to understand exactly which liability covers are included and at what limits.

Why Committees Need This

Committee members are often volunteers who take on governance responsibilities for the benefit of all unit owners. Understanding the liability exposure they carry is important:

  • Committee members are personally liable for decisions made on behalf of the body corporate where negligence or wrongful acts are alleged
  • The body corporate is the occupier of common property and owes a duty of care to those who use it
  • The Health and Safety at Work Act 2015 applies to body corporates as PCBUs in some circumstances, including when engaging contractors to work on common property

Speak to Your Adviser

The extent of a body corporate's obligations under health and safety legislation depends on the specific circumstances of each body corporate. Your adviser can help you understand your exposure and the cover options available.

How to Ensure Adequate Cover

  1. Review your current policy — check what liability coverage is included and at what limits
  2. Understand the limits — typical public liability cover ranges from $1 million to $5 million; confirm the limit is appropriate for your property
  3. Check committee/officers liability is included separately — this is often not bundled automatically and may need to be arranged as an additional cover
  4. Consider the specific risks of your property — properties with pools, gyms, car parks, or lifts carry higher public liability exposure
  5. Work with a specialist body corporate insurance adviser — a specialist can review your full insurance programme and identify any gaps in liability cover

Annual Review

Review your liability cover at each renewal. Changes to the property — such as new facilities, increased foot traffic, or changes to the number of units — may affect the level of cover required.

Frequently Asked Questions

Does body corporate insurance include liability cover?

Most specialist body corporate insurance packages include public liability cover as a standard component. However, statutory liability and committee (officers) liability are often separate covers that may need to be added. Your adviser can review your current policy to confirm what is included.

Are committee members personally liable?

Yes. Committee members can be personally exposed to claims arising from decisions made on behalf of the body corporate. This includes allegations of wrongful acts, errors, or omissions in administration. Committee (officers) liability insurance — sometimes called directors and officers liability — provides protection for these personal exposures.

What is public liability insurance for body corporates?

Public liability insurance covers the body corporate if a third party suffers bodily injury or property damage on or arising from the common property. Examples include a visitor slipping in a communal lobby, a tradesperson injured on site, or damage caused to a neighbouring property.

Do we need statutory liability insurance?

Statutory liability insurance covers fines and legal defence costs arising from unintentional breaches of certain legislation, including the Health and Safety at Work Act 2015 and the Building Act 2004. Whether your body corporate needs this cover depends on your specific circumstances. Speak with your adviser to assess whether it is appropriate for your situation.

How much liability cover do we need?

Typical public liability limits for body corporates range from $1 million to $5 million, though the right amount depends on the nature of your property, the risks present (such as a pool, gym, or car park), and the number of people who use the common areas. Your adviser can help determine an appropriate level of cover for your building.

Get a Liability Cover Quote

Speak with your adviser about liability coverage for your body corporate — including public liability, statutory liability, and committee protection.

Get Free Quotes

All quotes provided through Evolve Group Limited (FSP711891)