You need to understand the legislation in your State and as it applies to your Incorporated body, including the committee of management. While both South Australia and Victoria have specifically worded legislation relating to the responsibilities and obligations of Officers, these do not appear in the legislation of other States. The obligations can differ from State to State, and you need to be aware of the these because you and other Officers may have a statutory duty of care or be required to act with due diligence. In addition you or they may not be immune from allegations of wrong doing.
Office holders in a community group may assume any risk of personal liability will be fully eliminated by the process of incorporation. However this is not the case under Victorian legislation.
The Associations Incorporations Reform Act 2012, at Section 87 states:
An incorporated association must indemnify each of its office holders against any liability incurred in good faith by the office holder in the course of performing his or her duties as an office holder.
This does not make the office holder immune from liability, it simply requires the association must indemnify the office holder for any liability incurred when acting in good faith.
But how do you do this? There are two ways community groups can address this:
1). To fund from the assets of the organisation.
If the assets of the organisation are used up, or a group has minimal or no assets to cover the full amount of their Officer’s liability, the Officer would be liable for the remainder or full amount due.
2). Protection via insurance.
An Association & Officials insurance policy covers management exposures that accrue to a community group – and having access to an insurance policy will save the organisation from having to use its assets as well as solve the problem of having no assets to provide the statutory indemnity. So long as is not a criminal act, or liability arising from dishonest, fraudulent or malicious conduct the policy will provide an indemnity to the office holder. It is also important for you to understand that the indemnity will not be available where a liability is incurred by an Officer when not performing their duties and/or where they have not acted in good faith (again, liability arising from dishonest, fraudulent or malicious conduct or from a criminal act is not acting in good faith.
South Australian Legislation
The Associations Incorporation Act 1985, at Section 39B states:
Provisions indemnifying officers or auditors
- (1) Any provision, whether contained in the rules of an incorporated association or in a contract with the association or otherwise, exempting any officer or auditor of the association from, or indemnifying him or her against, any liability to the association that by law would otherwise attach to him or her in respect of any negligence, default, breach of duty or breach of trust of which he or she may be guilty in relation to the association, is void.
- (2) Notwithstanding anything in this section, an incorporated association may, pursuant to its rules or otherwise, indemnify an officer or auditor against any liability incurred by him or her in defending any proceedings, whether civil or criminal, in which judgment is given in his or her favour or in which he or she is acquitted.
- (3) Subsection (1) does not apply in respect of a contract of insurance.
Even if this legislation was not in place how would your Club fund the defence costs of any legal liability claim or pay any damages. Public & Products Liability insurance and Associations Liability insurance will assist your organisation to defend claims and, if you are liable, to pay damages that fall within the policy coverages.
The above statements are issued as a matter of information only and you should refer to the relevant legislation in the State your association is registered in.