Is trustee indemnity cover a requirement?

(Updated 24 February 2025)

If the prescribed management rule is read and interpreted in accordance with standard insurance definitions of public liability, it is reasonable to conclude that trustee indemnity is not a requirement under the prescribed management rules.

Prescribed Management Rule (PMR) 23.(6) of the Sectional Titles Scheme Management Act 8 of 2011 sets it out:

A body corporate must take out public liability insurance to cover the risk of any liability it may incur to pay compensation in respect of:

(a) any bodily injury to or death or illness of a person on or in connection with the

common property; and

(b) any damage to or loss of property that is sustained as a result of an occurrence or happening in connection with the common property, for an amount determined by members in general meeting, but not less than 10 million rand or any such higher amount as may be prescribed by the Minister in any one claim and total for any one period of insurance.

What does it mean?

As can be seen, the rule refers to bodily injury to or death or illness of a person and damage or loss of property

Public liability insurance, more specifically, property owner’s liability, typically covers these risks.

Thus, if a body corporate holds such cover, the requirement in terms of the rule is met.

However, the need for cover is far wider in practical terms. This liability cover normally does not extend to financial losses, which an owner or third party may incur following an error or omission by the scheme executives (trustees).  In terms of PMR 8.(4), the trustees are indemnified by the body corporate, and as such, without trustee indemnity cover,  the scheme is still exposed to this area of liability.

For that reason, we have always recommended that the body corporate also purchase trustee indemnity cover in addition to the standard liability cover.

What is the purpose of trustee indemnity cover?

Trustee indemnity essentially covers the trustees, and by indemnity (PMR 8.(4), the body corporate of a sectional title scheme against liability of trustees for wrongful acts, errors, or omissions in the course of their duties.

Thus, to put it more simply, public liability insurance will cover the injury, death, illness and damage to property (physical aspects) part of liability and trustee indemnity the non-physical aspects, i.e. the financial liability aspects.

An example of a property owner’s liability (public liability) claim matter would be a person who slips and falls and is severely injured because of broken lights and loose paving. Such a claim against the body corporate will be dealt with in terms of the liability section of the policy. On the other hand, if an owner or third party suffered a financial loss because of a poor decision or omission by the trustees, the trustee indemnity section of the policy would respond. An example might be incorrect decisions regarding permissions and so on.

Most standard off-the-shelf community scheme policy wording includes trustee indemnity.

We feel that trustee indemnity cover, whilst not compulsory, is an important need for any community scheme so that all owners are protected from liability in an ever-increasing litigious world.