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Duty to Insure Correctly

It often happens that a body corporate is not adequately insured in terms of the requirements as set out in the Sectional Title Act (soon the Sectional Title Schemes Management Act) and Prescribed Management Rules. In many cases there is an insurance broker involved, the very person who should know about the Act and rules, and who should advise the body corporate.

Is it the broker’s duty to ensure that the body corporate is sufficiently insured?  This might be so but when we refer to Prescribed Management Rules, there is no mention of an insurance broker – in fact, prescribed rules constantly refers to the duties of the trustees. The only possible reference to an outsider lies in the words “..Shall take steps to insure…”  Other than these words, the rule implies that the responsibility to ensure that the body corporate is sufficiently insured lies with the trustees.

In step with the general code of conduct for authorised Financial Services Providers (FSP) and representatives, FAIS (Financial Advisory and Intermediary Services) legislation, brokers or financial advisors need to provide a record of their advice to their client (the body corporate). We feel that he trustees need to see to it that the body corporate receives this written advice.  This is the only real answer to this dilemma, also for the trustees to ask some questions relating to the insurance of the body corporate.

Assuming an insurance advisor is involved, here are a number of those questions:

1. Does the body corporate have a sectional title specific policy?

2. Is the body corporate’s insurance advisor a sectional title specialist who knows the Act?

3. Is the insurance advisor’s staff properly trained in sectional title matters?

4. Has the insurance advisor advised the body corporate on the matter of “Other Risks” (PMR 29 (1) (a) (x))?

5. Does the insurance advisor know how to correctly set out the schedule of replacement values as required by the rules? (PMR 29 (b) (i))

6. Has the insurance advisor advised the body corporate what the implications of PMR 27 are when dealing with insurance claims?  (

7. Has the insurance advisor visited the premises?

8. Is the insurance advisor prepared to attend trustee- and/or Annual General Meetings to advise on the insurance item on the agenda?

These are only a number of questions the trustees should look at.

All in all, it is imperative that trustees take care with their choice of insurance advisor and that they aware of his credentials in Sectional Title Insurance matters. So many claims go wrong just because the insurance policy is not a sectional title specific policy and the recommendation is that trustees ensure that the body corporate is properly insured as required by the rules of the Act.


Author: Rian Pienaar

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