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Why some bodies corporate neglect Fidelity Cover

Our experience is that bodies corporate (and even Portfolio Managers) don’t really understand Fidelity Cover. The prescribed rules are pretty clear and in addition, some trustees have their own set of rules that sets out very specific responsibilities in this regard.

The prescribed rule sates that the trustees must ensure that a decision is taken at the general meeting on how much, if any, fidelity cover is required, i.e. how much insurance cover is needed to protect the body corporate against dishonesty of trustees, employees and managing agents. In reality this happens rarely.

It is probably overlooked for one or more of these reasons:

  1. Some managing agents find it awkward to suggest that the body corporate purchase insurance to provide cover against potential fraud by the service provider, in this case the managing agent.
  2. Trustees seem to think that because it’s a general meeting decision, they don’t need to attend to it.
  3. Not being listed in Rule 56 as a compulsory AGM agenda item, it is overlooked.
  4. Trustees and Portfolio managers incorrectly assume that the EAAB Fidelity fund covers these cases.
  5. The body corporate’s broker is not advised that Fidelity Cover (including purchasing cover against dishonesty of the managing agent) is a requirement and thus, does not provide this cover.
  6. Traditionally, rates have been too expensive.
  7. As the building’s policy usually includes a limited cover fidelity section, trustees and portfolio managers presume that this is adequate. These sections are mostly completely inadequate.

This is an easy problem to solve:  Portfolio Managers / Trustees should simply provide the broker with a copy of rule 29.2(b) or the body corporate’s equivalent rule and ask for a quote for sufficient cover. We suggest at least R1,000,000 as this can be purchased for as little as R3,000 per annum i.e. less than R300 per month. Obviously, larger schemes, especially where larger projects are being saved for, should purchase according to their needs.

Addsure has arranged a Trustee Indemnity / Fidelity Guarantee product named FIDCURE via underwriting managers CAMARGUE. This product is specifically designed to protect bodies corporate in terms of prescribed rule requirements.


Contact Addsure – The Leaders in Sectional Title Insurance – to get fit and proper advice from advisors who understand sectional title. Contact us in Johannesburg on (011) 704-3858; in Durban on (031) 459-1795 and in Cape Town on (021) 551-5069.