Dual insurance exists where an owner arranged insurance on a section, unaware that the body corporate already had insurance in place. To deal with this point one has to understand the provisions made for insurance by the Sectional Title Act 95 of 1986.
In terms of Section 37 (1) (f) the body corporate “…must insure the building or buildings at replacement values…” whereas Section 37 (1) (a) and (b) refers to the fund set up for insurance costs. In terms of Prescribed Management Rule (PMR) 29 (1) (a) “…the trustees shall take steps to insure…” From these extracts it is clear that it is the duty of the body corporate to arrange insurance as prescribed.
However, in terms of Section 45 (1) “…owners may affect a policy of insurance…” Therefore, while the Act compels the body corporate to arrange insurance, the Act also allows an owner to do so. In this case, dual insurance can occur where the section is double insured by two separate policies of insurance.
It is important to consider the implications of dual insurance, summarised as follows:
- The owner pays two premiums but can only benefit up to the replacement value.
- Claims will have to be dealt with by two policies, causing unnecessary delay in the settlement of the claim; invariably the basis of the insurance under the two policies are different.
- Generally, body corporate insurance is less expensive than personal insurance.
- When an owner discovers that dual insurance exists, unaware of the insurance arranged by the body corporate, the owner must insist that his/her policy is cancelled and that all premiums paid on his/her policy be refunded. With dual insurance, the two insurers normally agree to refund 50% of premiums for the time during which dual insurance existed. Unfortunately, in view of the body corporate policy being prescribed by Legislation, the insurer holding the body corporate policy may refuse to allow any refunds.
The recommendation is that owners leave insurance matters to the body corporate to deal with. Should an owner feel the need to increase the insurance value on his/her section, such a request may be put to the body corporate as prescribed in PMR rule 29 (1) (d) of the Act.
Author Rian Pienaar
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