Under previous prescribed rules, insurance rules guided us in respect of bursting or overflowing water tanks, apparatus or pipes, and with regards to the maintenance rule to direct us in dealing with geyser maintenance.
The basic interpretation of these rules was that a burst geyser will be covered by the body corporate’s insurance but the maintenance or repair of a geyser was the owner’s responsibility.
Strictly speaking this is correct, when a geyser bursts – which rarely occurs – it is covered by the body corporate’s insurance but any maintenance related matters is for the owner’s account. The most common interpretation was that geyser replacement due to wear and tear is also a maintenance issue as it amounted to the replacement of a worn component of the building. Geyser replacements due to wear and tear should never be covered in terms of the rules, especially if they were not being properly maintained. For an insurer to send a loss adjuster out to each and every geyser claim simply did not make any financial sense.
Many of the insurers started to cover geysers due to owner expectation and subsequently included a maintenance section in their policy. This step allowed insurers to better control geyser insurance by way of excess and limits, and to manage underwriting of policies better.
Has anything changed?
The new sectional title insurance rules and regulations do reflect quite a few changes with some of the previous insurance rules now situated in the regulations section.
Sectional Titles Scheme Management Act, Regulation 3, refers to other risks to be insured against. Of these, geysers are included as “water escape, including bursting or overflowing of water tanks, apparatus or pipes”.
The wording of the new regulation concerns us as it is not clear – it starts with “…may insure…” i.e. it does not say “must insure”. Now it also includes the words “water escape” which concerns us in respect of water pipes, as reputable and experienced insurers will not insure every instance of water escape. Sudden and unforeseen resulting water damage will still be covered as usual, as long as it is not as a result of wear and tear.
Previously, rule 68 stated among other things “an owner shall…. maintain the hot water installation which serves his section, or, where such installation serves more than one section, the owners concerned shall maintain such installation pro-rata, notwithstanding that such appliance is situated in part of the common property and is insured in terms of the policy taken out by the body corporate.”
The new geyser maintenance rule (PMR 31) states:
“Notwithstanding that a water-heating installation forms part of the common property and is insured by the body corporate, a member must maintain, repair and, when necessary, replace such an installation which serves that member’s section or exclusive use area; provided that where such an installation serves sections owned or exclusive use areas held by more than one member, the members concerned must share the maintenance, repair and replacement costs on a pro-rata basis”.
The inclusion of the words “… replace such an installation…” is interesting as it vindicates the interpretation from the old rule that geyser replacement in the normal course is a maintenance issue rather than an insured event.
A practical approach to the needs of a scheme is necessary. Every scheme has different dynamics and the trustees – guided by a competent broker – should really consider all factors concerning geyser insurance.
The trend is for excesses to be higher along better management of claims by insurers.
Underwriting manager FPA (First Property Acceptances) has been very successful in managing costs via their call centre and underwriting practices. Assisting with the problem right away also mitigates further loss and frustration. CIA (Commercial and Industrial Acceptances) leads the way in managing geyser claims and has done so for many years. CIA’s advancement of their geyser claim system and sound underwriting has helped. New players offer a more proactive approach including assistance with anode replacement but this approach also has its challenges.
What can we expect going forward?
Geysers will remain a high claim item where insurers accept geyser replacement as an insured event. We can expect to see higher excesses being applied or conditions attached where geysers are not maintained.
There are also new technologies such as devices providing information about your geysers condition electronically and devices that switch off the water supply when a problem occurs. These preventative measures are good but come at a cost for the owner’s pocket, at this stage.
Geyser insurance is here to stay but in the meantime, expect higher excesses which are justified considering geyser replacement is really an owner’s responsibility and should not ordinarily be covered.
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 on (011) 704-3858; in Durban on (031) 459-1795 and in Cape Town on (021) 551-5069