PROPERTY: Resolving Insurance Excess Disputes
Recent Western Cape Business News
A bone of contention, in many sectional title schemes, is the application of insurance excesses. Some argue that as the body corporate is insured under a single combined policy the body corporate should also be responsible for the excess.
To date the application of insurance excesses has been left to the discretion of the trustees, unless a special resolution had been passed to the contrary.
Martin Bester, Regional Manager of Intersect Sectional Title Services, the sectional title management subsidiary of the Spire Property Group, explains how a recent amendment to the Sectional Title Act, (Prescribed Management Rule 29 - the insertion of sub rule 29 (4)) has sought to resolve this often contentious issue.
“This change is most welcomed by the industry and trustees alike. The exact wording of the amendment is as follows:
“The owner of a section is responsible for any excess payment in respect of his or her section payable in terms of a contract of insurance entered into by the body corporate: provided that owners may by special resolution determine that the body corporate is responsible for excess payments in respect of specified damage.”
“In plain and simple English the excess is payable by the owner of the section that suffers the loss or damage,” explains Bester, who says that it is further suggested that should the loss or damage affect more than one section then the excess should be split on a percentage basis between the affected parties.
“Further to this, should the loss or damage be suffered on the common property then the body corporate will be liable for the excess. Naturally exceptions will occur, and the trustees will be required to use their discretion in these circumstances, but this amendment does go a long way to resolving excess disputes on the clear cut cases.”
Ensuring that the scheme is properly and adequately insured against certain perils is one of the fundamental duties of trustees, but is also one that is most misunderstood and often overlooked.
Bester, who sits on the board of the Residential and Sectional Title Committee of SAPOA and is a committee member of National Association of Managing Agents and the Sectional Title Regulations Board, says that Intersect always advise trustees to have the buildings and common property professionally valued at regular intervals. “Every three to four years would be advisable, so as to ensure that the replacement values are up to date and correct.”
“There are certain underwriting companies who have policies specifically geared to sectional title insurance and the scheme’s insurance broker would be able to provide advice to the trustees in this regard,” concludes Bester.
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