Even now, there’s still a healthy line-up of auctions around the country each Saturday. And while mistakes at auction are rare, they do happen and it’s a good idea to have insurance in place for these circumstances.
For instance, last year there was an incident related to a property sale considered to be under auction conditions. On the day, only one buyer had registered to bid. So the vendor and auctioneer decided rather than run an auction, the agent would negotiate a sale with the buyer directly.
The sale went ahead. But the buyer changed her mind shortly afterwards and served a rescission notice, requesting her $570,000 deposit be returned. A judge later determined a cooling off period was applicable because the auction had never been run.
The buyer successfully rescinded the contract and received her deposit back. In circumstances such as these, professional indemnity insurance may have a role to play by covering the auctioneer’s liability for damages and legal costs. Emma Barnes, CEO of the Auctioneers and Valuers Association of Australia (AVAA) says the importance for auctioneers to have insurance cannot be underestimated. Specifically, valuers need professional indemnity insurance to be a member of the AVAA, which is the industry’s peak body for non-real property auctioneers and valuers.
“Professional indemnity insurance has been particularly relevant since the advent of the Personal Property Securities Register (PPSR) legislation,” she says. The PPSR is a national, online register that can provide information to help protect consumers when they are buying personal property.
“Specifically, valuers need professional indemnity insurance”
“In light of this legislation, it’s also good idea for auctioneers to consider having an industrial special risk policy or insurance covering the stock they have in their possession,” Barnes recommends.
Specifically, mistakes can happen around incorrect entries on the PPSRs. There’s a risk of assets being sold when encumbered if the entry is incorrect. “This needs to be a major point of focus, with checks and controls in place. We suggest auctions be recorded so auctioneers have evidence of proceedings. It’s essential for auctioneers to check paperwork and document conversations,” Barnes recommends.
Auctioneers also need other protections, says First National Real Estate’s national business growth manager and chief auctioneer Matthew Harvey. “Auctioneers need public liability insurance if somebody trips and falls at an auction and claims the auctioneer is liable,” he says.
They should also think about taking out workers’ compensation insurance. Some may also choose to have directors and officers’ liability insurance and travel insurance given how much they travel.
Cyber risk insurance should also be carefully considered, given auction house Manheim Auctions was recently the subject of a ransomware attack.
Other risks include consumers claiming breaches of Australian consumer law as a result of misleading and deceptive conduct, should auctioneers make errors when describing property. Auctioneers should also be covered for theft given there’s a risk of theft when houses to be auctioned are open for viewings. Also consider employing security.
“There are many risks in auctioneering. We suggest working with a broker who fully understands the industry and your business to help ensure your cover is correct. This will give you a better chance of your claim being paid should you ever need to use the policy,” Barnes adds.
This information is provided to assist you in understanding some of the common considerations in insurance. It is not complete, so please request full details from your Steadfast insurance broker. Deductibles, exclusions and limits apply. Insurance policies issued by various insurers often differ.
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