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Insurance and General Meetings

When it comes to dealing with insurance at General Meetings, there are four aspects that need to be considered:

1. The schedule of replacement values
2. Fidelity cover in terms of MR 29.2(b)
3. Special resolution in terms of MR 29.4
4. Any other insurance that may be needed in terms of MR 29.3

Schedule of replacement values
Aside from it being a compulsory item on the agenda for the Annual General Meeting (AGM), it is important to present the schedule of replacement values and related information properly at the AGM and make sure the schedule is understood and approved by the owners.

The minutes should record this accurately to clearly reflect the final decision on how the replacement cost of the buildings was determined and that all owners agree and approve. It should be noted that the chairperson explained the additional sum so that no owner can later claim that they were not aware of, nor understand the insurance schedule or how the values were determined.
Be careful to not focus too much on other information as the policy structure is likely to change between meetings during the course of the year.

Fidelity cover in terms of MR 29.2(b)
Prescribed Management Rules oblige the trustees to ensure that the amount of Fidelity cover, if any, is determined at a general meeting. Many bodies corporate have their own rules and these often set out specific guidelines with regard to fidelity. Make sure that this ordinary resolution is noted and a record kept; otherwise place the matter regularly on the Agenda of General meetings.

Special resolution in terms of MR 29.4
This rule is not a new rule anymore however, it is surprising how many key sectional title role-players are not aware of who should be paying excesses in terms of this rule.

Let’s unpack this in its most simple form:

This rule provides that an owner pays for the insurance excess where damage pertains to his or her section.

The rule also makes provision for specified damage for which the body corporate could pay the excess, subject to a special resolution being passed.

This relatively new prescribed rule came into effect only a few years ago and this changed the way trustees and managing agents deal with policies and claims, particularly in multi-storey buildings where higher excesses exist. Better informed insurance advisors now structure policies appropriately and deal with multiple section damage claims somewhat differently. In order that some owners not be prejudiced with situations like north-facing weather damages, top storey roof failure risk and so forth, the special resolution might be a very good idea.

We advise that a standard special resolution on specified damage excess will take care of the grey areas and should be done by most bodies corporate. The easiest way to ensure that it gets done, is to make it an agenda item at least once.

Then there is the case of other insurance besides the normal building insurance required, for example vehicle insurance for the body corporate’s estate manager’s vehicle; perhaps a special resolution should be obtained for this?

In summary:
1) Rule 29.1.(c) places an obligation on the trustees to ensure that a schedule of replacement costs is properly prepared ahead of the AGM and laid before the meeting. It should be included with the notice.
2) Rule 29.2(b) directs the trustees to discuss and decide at a general meeting the amount of fidelity cover that is needed, if any.
3) Rule 29.4 provides the opportunity to tailor the responsibility of excess for specified damage by way of a special resolution.
4) Rule 29.3 restricts trustees to committing to insurance of the buildings.

Suggested formats for these meeting notices and sample resolutions should be obtained from your managing agent and in some instances, your specialist insurance advisor.
The rule 29.4 Excess Addsure template and others can be found on the Addsure website.


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 us in Johannesburg (011) 704-3858; Durban (031) 459-1795; Cape Town (021) 551-5069