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Is Trustee Indemnity Cover a Requirement?

With reference to liability, trustees should insure the owners and the trustees to keep them insured against liability in respect of death, bodily injury, illness, or loss of or damage to property occurring on common property.

The above states “owners and the trustees” and that often creates the incorrect perception that this means that trustee indemnity cover is a requirement.

It is important to understand that trustee indemnity cover generally refers to protection afforded to the body corporate and the trustees from claims arising from to the economic or financial loss caused by the wrongful act of a trustee. Wrongful act  usually refers to actual or alleged breach of trust, breach of duty, neglect, error, misstatement, misleading statement, omission or other wrongful act committed or attempted by a trustee arising from his acting is his capacity as a trustee. Usually, trustee indemnity will exclude liability in respect of death, bodily injury or illness or loss of or damage to property.

An example is where the trustees approve or allow something in error, such as approving the enclosure of a balcony. Balcony enclosures would normally require a unanimous resolution and not only a trustee’s resolution. If an owner is incorrectly allowed to enclose his balcony and is then forced to remove the enclosure (after complaints from other owners), that owner may bring action against the trustees for his financial loss. There is no injury or damage, so it cannot be claimed under the liability section. This is where the need for trustee indemnity arises.

It is our view that while trustee indemnity is not a requirement, ensuring that it is included is highly recommended, both for sectional title and homeowners association schemes.

Most sectional title and homeowners association polices now include a trustee indemnity section.  The more cover, the better.


Author:  Mike Addison, Addsure

Contact Addsure – The Leaders in Sectional Title Insurance – for 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