Dual insurance exists where an owner arranged insurance on a section, unaware that the body corporate already has insurance in place. To deal with this issue, you have to understand the Sectional Title Schemes Management Act No 8 of 2011 insurance provisions. There are three sections that deal with insurance:
- Section 3 (1) (h) requires the body corporate “to insure the building or buildings and keep it or them insured to the replacement value thereof against fire and such other risks as may be prescribed”
- Section 3 (1) (I) requires the body corporate “to insure against such other risks as the owners may by special resolution determine”
- Section 3 (1) (h) requires the body corporate “to pay the premiums on any insurance policy effected by it”
From these extracts, it is clear that it is the duty of the body corporate to arrange insurance as prescribed.
Section 14 (1) does however state that, despite Section 3 (1) (h) above, “…an owner may obtain an insurance policy in respect of any damage to his or her section arising from risks not covered by the policy effected by the body corporate.”
It is important to consider the implications of dual insurance, summarised as follows:
- The owner is paying two premiums but can only benefit up to the replacement value of his unit.”
- Claims will 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 is different.”
- Generally, body corporate insurance is less expensive than personal insurance.”
- When an owner discovers that dual insurance exists, they must insist that their policy is cancelled and that all premiums paid on their policy be refunded. With dual insurance, the two insurers normally agree to refund 50% of premiums for the time during which dual insurance existed. In the case of the sectional title policy, it cannot be replaced. Therefore, the body corporate’s insurer may not reimburse premium and dilute the cover. It is impossible to do so as the owner’s policy should only refer to their own section while the body corporate’s policy includes the common areas along with liability, fidelity and other additional cover.
We recommend that owners leave insurance matters to the body corporate. Should an owner feel the need to increase the insurance value on their section, a request should be put to the body corporate as prescribed in Regulation 23 (1) (b) of the Act.
Author Rian Pienaar
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