Excess Sub Rule 29.4

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 way of a special resolution, determine that the body corporate is responsible for excess payments in respect of specified damage.

This is a prescribed rule.

The first step is to make sure that the body corporate is making use of prescribed rules and does not have an amended rule in respect of its excess already. Assuming that the prescribed rule applies, trustees (guided by their portfolio manager) need to consider the situation carefully.

The implication is that an owner becomes responsible for any excess in respect of damage to his or her section.  The trustees negotiate the premium, excess and rate; therefore the trustees need to consider what is best for the owners collectively, given the environment. This could differ greatly from one body corporate to the next. For example, a building with on-going roof problems and regular water damage to sections on the top floor could be prejudicial to the owner of those top floor sections. Some buildings may be of a higher risk for insurers or have poor claims histories, therefore insurers impose higher excesses for certain risks, e.g. R10 000 excess for water damage or R50 000 excess on laminate flooring.

Some bodies corporate comprise mainly pensioners with fixed incomes therefore higher excesses are not best suited for most owners under these circumstances. Another example is tower blocks or separate townhouse sections. The insurance advisor (intermediary) needs to participate in establishing the needs of the body corporate and needs to understand this rule.

Remember, the rule has two parts: 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 way of a special resolution, determine that the body corporate is responsible for excess payments in respect of specified damage.

It is very simple to deal with this rule, yet so many trustees and portfolio managers disregard it.

We suggest that the second part of the rule be dealt with by having a special resolution passed at the next AGM. In addition, we suggest a resolution listing events or damages that occur from “an outside force”, e.g. wind, hail, storm, earthquake, etc; the body corporate will be responsible for the payment of those excesses.

A sample/template can be downloaded here: http://dev.addsure.co.za/wp-content/uploads/2014/07/Adddsure-29-4-Resolution-sample-template.pdf

This is a rule that needs to be considered carefully; consult a reputable insurance advisor before making any decisions.

 

Author: Mike Addison, Addsure

Contact Addsure – the leaders in Sectional Title Insurance – to get fit and proper advice from advisors who understand Sectional Title. Contact Johannesburg on (011) 704-3858,  Durban on (031) 459-1795 or Cape Town on (021) 551-5069.