It has become usual practice for an insurer to appoint their own legal representative to take over the conduct of a proceeding where the body corporate has been sued and has issued a claim on its insurance policy for coverage of its legal expenses.
It is imperative to remember that any sum of money required to be paid out by the body corporate does not come out of the insurer’s pockets. The extent of the insurer’s liability is only to cover the body corporate’s legal costs up to a certain amount.
Here lies a clear conflict of interest.
An insurer interested in spending the least amount of legal costs and a body corporate relying on the advice of a legal representative, paid for by the insurer, to advise the body corporate on whether it should settle/how much it should pay or whether it should pursue the matter and potentially have its costs recovered as part of the proceeding.
This doesn’t sit well with me.
Who is to say that the body corporate won’t be advised to pay a sum of damages greater than what it should in order to bring the proceeding to an end to minimise the amount paid out under the insurance claim by the insurer? Who is to say that a body corporate will be advised not to pursue a matter, not on the merits of their defence, but on the likelihood of costs being recovered by the insurer?
So what should your body corporate do?
As with any insurance claim, fight for what the body corporate wants! Bodies corporate can insist upon electing their own representative. I wouldn’t take my car to a repairer elected by my insurance company, so I certainly wouldn’t use a lawyer appointed by my body corporate’s insurer.
