In the area of sectional title insurance, it is true that all members are the insured. While the insurance policy is issued in the name of the body corporate, the description of the insured goes on to include “all individual unit owners and all mortgagees…. for their respective rights and interests”.
Does this mean that the broker and insurer are compelled to deal with all members whenever they require assistance? The answer is both yes and no.
Yes. All members are the client and should be provided with proper service and advice.
No. For the sake of good administration, transparency and the benefit of the entire body corporate, most issues should go through the correct chain of command. This means the trustees go to the managing agent, the managing agent goes to the broker and the broker goes to the insurer.
Sectional title legislation requires the appointment of trustees by the body corporate to act on their behalf. In most instances, this means that the trustees are the conduits for the members when they need assistance regarding body corporate matters.
It is not advisable that members by-pass the trustees or managing agent regarding insurance matters. The trustees are responsible for insuring the buildings and all common property as well as negotiating the most beneficial insurance terms. To do this, they need to be aware of all insurance related matters before considering the proposed insurance terms. If unit owners are by-passing the trustees, managing agent or broker when they submit changes or claims relevant to their section, the trustees will not be in the best position to manage the body corporate insurance.
When the insurer prepares a policy renewal, claims history is one of the most influential factors that determine renewal terms for the next period of insurance. If the trustees are unaware of some of the claims submitted directly by owners, they will be disadvantaged in the negotiation process. The result may be renewal terms that are not as favourable as they can be which will impact on all members.
It is also important that the trustees are aware of any claims situation so that they can manage the impact of the claim on the body corporate. This includes ensuring all relevant areas of damage are identified and included in the claim; appointing approved contractors; authorising contractor access to the property; monitoring the behaviour of contractors while on site and approving the settlement offer made by the insurer.
When owners by pass the appropriate chain of command, the claims process often becomes derailed and unnecessarily complicated. It is advisable to have a claim form signed by the relevant unit owner and a trustee or the managing agent. By following the correct chain of command, administrative processes will be more efficient and the entire body corporate will benefit accordingly.
Author: Bruce Gibson, 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