There are a number of insured perils or risks that cause damage to multiple sections of a community scheme simultaneously when they occur. These perils most commonly comprise storm, wind, rain and water. With this in mind, it is important to understand some of the foundational principles of insurance – and in particular, community scheme property insurance.
Principle 1: One incident = one claim
For a claim to be considered, there must be quantifiable damage as a direct result of a single, identifiable and uninterrupted incident or event which is not excluded under the current policy. In the event that two or more unrelated incidents occur at the same time, damage from each incident will be the subject of separate claims. For example – a severe wind and rain storm damages windows and the roof, resulting in water damage to multiple sections. At the same time a bathtub accidentally overflows causing separate water damage in a section that also suffered storm water damage. The insurer will treat this as two separate claims, requiring separate documentation and subject to separate excesses.
Principle 2: All insurance transactions must be processed via the body corporate
The community scheme property insurance policy is issued in the name of the body corporate; not in the name of individual unit owners. While the body corporate does not actually own the property, in terms of the Sectional Title Schemes Management (STSM) Act 2011, the body corporate is legally bound to insure the property. The insurance policy is issued as a contract between the insurer and the property owners. The STSM Act supersedes the insurance contract. Essentially, the insurance policy indemnifies the owners but belongs to the body corporate.
Principle 3: Body corporate documents must be signed by a trustee in order to be valid.
In terms of Prescribed Management Rule 10(1)(b) all documents signed on behalf of the body corporate must be signed by two trustees or one trustee and a managing agent. Therefore, if one incident is one claim and the insurance policy belongs to the body corporate, only one claim form signed by the trustees may be recognised as legitimate – regardless of how many sections are damaged. Individual unit owners may not submit claim forms exclusively for their unit in a multi-section damages claim.
When a multi-section damages claim arises the trustees and managing agent need to act quickly to ensure that all unit owners (or tenants) are contacted immediately to facilitate the prompt compilation of the necessary claims documentation. The body corporate may want to simplify and expedite the process by appointing one or more particular contractors to attend to all damages (this is rare as most unit owners will call on their own choice of contractor).
It is vital that all claims documentation is compiled and submitted timeously to ensure the reinstatement of damaged property as soon as possible.
In claims of this nature, a loss adjuster will likely be appointed by the insurer but this will not happen until the insurer receives a claim form – together with sufficient evidence (photos, quotes) to indicate substantial damage – and register the claim. The loss adjuster will then take over the claims process, making appointments to meet with unit owners, appointing contractors and finalising the settlement.
Common issues that may arise include delay in collecting and collating claim submissions from owners or tenants, submitting documents to insurers within a reasonable period and facilitating a mutually agreeable time for the loss adjuster to inspect all damaged sections.
Many hands make light work
While the Addsure brokers make themselves available to assist and advise, the trustees and the managing agents are the official representatives who know and interact with individual owners and tenants. As such, it is most practical for them to drive the initial claims submission process.
Multi-section damages claims are significantly more traumatic and complex, particularly due to the number of individuals involved at the same time. Processing and settling these claims successfully require commitment, communication and teamwork. When owners, trustees, agents, brokers, insurers loss adjusters and contractors work together, the process will reach an amicable conclusion in the least amount of time.
Author: Bruce Gibson