12 Common Insurance Mistakes Trustees Make

1. Fidelity rule ignored. Despite the fact that prescribed rules under the Sectional Titles Act and proposed Sectional  titles Schemes Management Act oblige owners to decide on the amount of  fidelity cover required at a general meeting, very few bodies corporate consider this important insurance aspect.  Click here for more about this common omission.

Now, the soon to be implemented CSOS regulations coupled with proposed new STSM rules should bring more clarity as it becomes compulsory.

2. Insurance advice not received in writing or written record not on file.  Trustees should see to it that their insurance advisor properly advises them at least annually on policy renewal in relation to buildings, liability and fidelity.  This is rarely insisted on by trustees. Click here for a more detailed blog article about this important common oversight.

3. The determination of insurance replacement value is an important trustee responsibility but usually taken far too lightly. Many trustees fail to obtain regular valuations and rarely consider building inflation on renewal.  Proposed new prescribed regulations will make a valuation obligatory (to be undertaken at least every three years) and will need to be presented at AGMs.

4. When appointing or considering a new managing agent, very few trustees seek confirmation that the managing agent has professional indemnity cover or whether they have appropriate fidelity insurance cover in place.

5. Very few trustees make a conscious effort to keep the common area safe by way of regular walkabout inspections.

6. Trustees often perceive cheapest premium to be best. This approach often leads to higher risk by way of higher excesses and less cover. Trustees should be guided by the broker’s or insurance advisor’s advice and ensure that the cover is appropriate and check that excesses are not too onerous.

7. Trustees very often do not realise the importance of a broker who understands sectional title. Most short term brokers are licensed to assist bodies corporate with the product selection however; many do not understand basic sectional title concepts. It is important that a broker understands the needs of the body corporate (the owners collectively), not just the building.

8. Trustees often assume that the insurance already in place is adequate and correct. Usually this is not the case. By default, policies usually exclude retaining walls, subsidence and landslip and other needs a body corporate may have, e.g. extended or additional needs in terms of electronic equipment and/or power surge.  Trustees should revisit their needs periodically.

9. Exclusive Use Areas (EUAs) are often overlooked mainly as trustees very often do not fully understand the concept.  A competent insurance advisor together with a valuer familiar with sectional title can ensure that EUA improvements are correctly shown on Schedules of Replacement Values (SRVs) and adequately insured.

10. Often trustees are unaware that policies will likely exclude losses where reasonable preventative measures could have prevented a loss.  Examples include: failure to maintain the building or waterproofing, failure to repair or replace a worn out roof sheet, failure to keep paving in a good condition or failure to keep the building to national building regulation standards which results in a loss of property or injury.

11. Trustees sometimes incorrectly perceive that sectional title insurance policies cover trustees against Occupational Health and Safety (OHS) mishaps, fines, etc.  This is an incorrect assumption as actually, failure to comply to OHS safety requirements which could lead to injury on common property would be a criminal matter rather than a liability matter alone, and fines or criminal acts are normally specifically excluded.

12. There is often an incorrect expectation from trustees and owners that any leak or water related matter is covered by insurance.  Trustees and owners should acquaint themselves as to what is and what is not covered. A good insurance advisor should coach trustees in this regard.

 

Author: Mike Addison

Contact Addsure – The Leaders in Sectional Title Insurance – to get fit and proper advice from advisors who understand Sectional Title. Contact us in Johannesburg (011) 704-3858; Durban (031) 459-1795; Cape Town (021) 551-5069