In this blog article, we would like to address five common questions that often arise relating to sectional title insurance claims and the rights of the owner.
As an owner, what are my rights and what role do I play?
In the sectional title environment, the owner owns a proportional part of the buildings as well as an undivided share in the common property. The section you own is demarcated by an imaginary line halfway through walls, windows and floors which is known as the median line. As the buildings must be insured, it is impossible to insure each unit without being left with some grey areas.
The Sectional Titles Scheme Management Act (STSMA) provides for this, in that the body corporate must insure the buildings as set out in the relevant rules and regulations. Effectively, this makes the body corporate the insured, although the policy contracts recognise each owner as co-insured. Therefore, when an owner incurs damages, the body corporate needs to attend to the claim and ensure that claim disbursements are used for reinstatement.
For that reason, the owner takes the place as a witness and submits his or her claim with signatures from two trustees, or one trustee and the managing agent.
We always recommend that the trustees provide owners with a rightful space to claim, albeit via the body corporate. Likewise, where claims are rejected by the insurer, owners should be given the opportunity to object or to see their claims considered by the Ombud for short term insurance.
What is actually insured?
Remember that insurance is there to protect owners from risks within three main categories: Material damages to the buildings, liability and fidelity.
- Material damages
In the context of material damages, we refer insurance claims as damages caused by certain sudden and unforeseen events such as storm damage, hail damage, earthquake, flooding, fire, bursting of pipes, impact damages and some accidental damages.
Therefore, an overflowing bath and resultant flooding of a section would be claimable, but a slow bath trap leak which drips and causes damp and damage over time would not constitute a claim. A sudden pipe burst which causes a substantial flow of water would be claimable, whereas a slow leak caused by rusty old pipes would not constitute a claim.
Ordinarily, wear- and tear-related claims are excluded.
An expensive water- or pipe-related issue does not necessarily mean there is a valid claim.
Liability claims arise where someone is injured or when they suffer loss or damage on your property where it can be proven as negligence on the part of the property owner, for example, a visitor slips and falls as a direct result of a lack of maintenance by the body corporate.
Fidelity claims will typically arise where the body corporate loses funds through dishonesty, misappropriation of funds.
What about my geyser – is it insured and to what extent?
Geysers have always been covered as part of the buildings where they are covered for bursting and other risks such as earthquake, fire and related perils. However, when it comes to repair or replacement, the owner is responsible to maintain their geyser. Many owners mistakenly assume that their geysers are covered when they reach the end of their useful lives. For that reason, several sectional title insurers have included a special maintenance section for geysers. While geysers should not be insured for wear and tear, they usually are but within specific limits and with excesses.
How do I check the details of the scheme’s policy?
As an owner, you are entitled to ask for a copy of the policy from the managing agent or trustees. Be sure to ask for the policy wording along with the policy schedule – its pointless reading the one without the other. It would be a good idea perhaps to ask also for a copy of the advice that was provided to the body corporate about the policy and how it stacked up at policy renewal. That should explain any higher excesses or exclusions specific to the policy.
What exactly is an excess and why is it sometimes so high?
Excess is the first amount payable. Essentially, it is the uninsured portion, usually in place to prevent frivolous claims. It is also a tool to manage the policy.
A scheme with a lower claims ratio – the ratio of claims to premium – would have a lower excess on certain events than a scheme with a high rate of claims. Mitigation and intervention can reduce claims which will reduce the burden of higher excesses on owners. This includes regular checks on roof waterproofing, timeous painting and proactive waterproofing. Using honest plumbers and better quality (or higher spec) products can go a long way to improve ratios.
We think owners should be more familiar with their insurance rights and responsibilities. That is also the reason Addsure offers educational support such as sectional title insurance workshops, webinars, downloadable guides, blog articles as well as ongoing advice and consultation.
Author: Mike Addison
Contact Addsure – The Leaders in Sectional Title Insurance – to get 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