Financial advisers and accountants risk being sued for not ensuring self-managed superannuation fund (SMSF) trustees have insured properties in their funds.

Brett Davies from Tax Lawyers Australia told insuranceNEWS.com.au he has seen a number of claims where a property was not insured and the trustees are recouping their losses from the adviser.

“When the fund is audited, the auditor will ask if the property is insured,” he said.

“It is the trustee’s responsibility to ensure the property is insured, but they will claim the adviser never told them to do it.

The problem has arisen since the Federal Government relaxed the rules on self-managed funds borrowing. This has led to more trustees looking to add properties to their investment portfolios.

The poor performance of shares and managed investment funds has also sent trustees looking for bricks and mortar as a safer investment strategy.

Previously, trustees tended to have the family factory or office in the fund and they were usually insured as a broker handled all the family’s insurances.

Mr Davies says details of insurance should be included in the investment strategy document the fund produces.

“We get a number of negligence claims because the strategy fails to explain why insurance is important,” he said.

While the adviser and accountant cannot recommend a particular insurance product due to the rules on providing financial advice, Mr Davies says there is nothing to stop them providing generic advice.

“The adviser and accountant is allowed to recommend the property is insured, but they can’t specify a brand or product,” he said.