Why managing agents need professional indemnity and fidelity cover

(Updated 19 August 2024)

A professional and responsible managing agent protects both their business as well as their client (body corporate) by having professional indemnity (PI) and their own fidelity cover, these days commercial crime cover. It is our firm belief that as a professional who are relied upon for expert guidance and advice, you should be covered by professional indemnity insurance – and so should any other professional advising or servicing the body corporate. Prudent scheme executives should check whether their insurance advisor, valuer, legal advisor, auditors, etc. have PI cover before engaging their services.

Professional indemnity cover

This cover is used to protect professionals where they may be held liable for advice given that produced negative consequences. Liability can arise due to a breach of duty of care, or a breach of contract – errors and omissions, in other words.

There are a number of instances where action was brought against professionals are as a result of damages sustained due to the professional’s failure to perform according to the generally accepted standards in their respective fields. This may expose such professionals to litigation.

In the case of a managing agent, it could be a case of failure to meet the contract or, in the absence of a contract, the failure to meet standards as set out in the National Association of Managing Agents’ (NAMA) code of conduct, where such a managing agent has subscribed to this or purports to have subscribed to this.

Over the years, we have seen threats of claims against the managing agents for errors, slip-ups, omissions, etc.

Fidelity cover

Fidelity Guarantee, Fidelity Cover, fidelity insurance or commercial crime insurance is essentially insurance against losses occurring as a result of fraud or dishonesty by employees of the business or practice. Notwithstanding the Property Practitioners Regulatory Authority’s (PPRA) fidelity fund it is highly recommended that a managing agency protect itself by way of additional fidelity or commercial crime cover.

The PPRA itself states: “An estate agency business is not entitled to recover any loss from the fund if the business has been held liable to pay compensation to a member of the public because of the theft committed by an employee agent. Firms should, again, assess the risk and take out the necessary fidelity insurance policies to cover any such loss.”

Therefore, if an employee misappropriates funds or causes a loss to the company, client body corporate or Home Owners’ Association through dishonesty (especially outside of a trust account), the business could be crippled without additional cover or would not be able to repay the loss incurred by the client.

Why Addsure?

Since 2007, Addsure has specialised in providing fidelity and professional indemnity cover for managing agents and over the years, have learnt much about the risks and types of claims experienced by managing agents.

As such, Addsure assists supporting clients in obtaining such cover, particularly by understanding both the sectional title risks of community schemes and the other risks that a managing agent might be faced with, for example, liability claims where the managing agent is brought in as a second defendant. Other risks include things like loss of data, breach of systems (cyber liability risks), other computer crime such as hacking and phishing.