The Cover:
A sectional title body corporate is required, by law, to ensure that there is sufficient cover in place for the all the structures and common property of the body corporate. There are an array of insurers that can meet the very basic cover requirements and others that provide detailed and niche cover that is applicable and appropriate for body corporate risks. More often than not, the more thorough specialist insurance options are more competitively priced than the bare minimum options.
The Trustees of the Body Corporate are tasked with sourcing, presenting and implementing the insurance cover. They are also required to present the terms and conditions to the other owners and to ensure that the body corporate is compliant so as not to jeopardize coverage in the event of a claim. Owners are allowed to request a copy of the cover and should read it over and ask questions.
Trustees Liability:
The Sectional Titles Schemes Act places a great responsibility on Trustees and as a result, one must be aware of the duties and responsibilities of the position when considering taking a seat as a trustee or chairperson. The trustees can be held personally, legally liable for damages or loss as a result of errors or negligence. For example, not insuring a body corporate for the correct value… owners can sue trustees for any short falls if the merits allow.
If you are a Trustee, you must insist that the insurance policy includes Trustees Liability Cover.
Further to this, legislation also requires that the body corporate insurance covers Fidelity Insurance (money handling risks) and Public Legal liability for a minimal limit of R10 000 000.
Who Pays and How:
The insurance is paid by the body corporate to the insure but the insurance premium is recuperated in the Levy charges to each respective owner.
The insurance, per section, is generally calculated as a ratable contribution based on your units Participation Quote (PQ). However, where a section owner may require additional cover or their bank requests a higher insured figure, then that section owner will be required to pay the difference over and above the PQ figure.
The Excess and Who Pays:
Most policies include an excess of some sort unless full excess waiver has been purchased. You will HAVE to check your policy schedule to familiarize yourself with the excesses as they vary greatly from one insurer to another.
Who pays the excess when a claim arises? Well, the general rule (per Prescribed Management Rule 29(4) in the Sectional Titles Act) indicates that the section owner claiming for damages is the party liable to pay the excess. Where the claim is for damages to common property, the excess would be payable the Body Corporates funds.
Special Resolutions can be passed to clarify what parties are liable for the excess in various events. This can ensure conflict at a claims stage can be avoided.
Legislated Requirements and Best Practice:
Legislation imposes several requirements which include but is not limited to…
- Fidelity Guarantee cover (use of a specific formula to determine the correct insured value)
- R10 000 000 Public Legal Liability cover
- Professional Building Insurance Replacement Valuations at least every 3 years
We hope this paints a clearer picture of what Body Corporate insurance entails but please know that there is much more than this and details do vary based on the Body Corporates rules and resolutions as well as what the current insurer may require or impose.
As a Trustee, you must familiarize yourself with the legislation, the cover and what your responsibilities entail. Don’t get caught out.
As an owner of a sectional title schemes property, you must familiarize yourself with the insurance.
