Your building insurance claim was rejected. What now?

[Updated: 23 May 2025]

“I’m an owner, and my insurance claim was rejected. What now?”

No one feels good when they receive a letter with the words Claim Rejection. It’s natural to want answers, or even someone to blame, when things go wrong, especially when there’s an expectation that certain events are automatically covered by insurance.

Trustees are legally obliged to insure against specific risks, usually those set out in Section 3(1)(h) and Regulation 3 of the Sectional Titles Schemes Management Act 8 of 2011. Most sectional title insurance policies do cover these events, however, every policy also contains exclusions and conditions.

For instance, damage resulting from wear and tear, corroded pipes, or long-term issues like pinhole leaks, damp, and water-damaged cupboards are typically not covered. These are considered gradual or wear and tear related issues.

An insured peril is an event like a burst pipe, fire, flood, or storm, something sudden, unforeseen, and that occurs at an identifiable date and time. Policies based on insured perils require the claimant to prove the proximate cause of the damage, that it was indeed an insured event as defined in the policy. More modern all-risk type policies tend to list what is not covered, which helps clarify expectations.

Who is actually insured?

In a sectional title scheme, the body corporate is the insured party. The owner is an interested party with rights under the policy, but not the insured themselves. The body corporate, and thus the trustees, are responsible for managing the scheme’s insurance, especially when it comes to claims.

So, what happens after a claim rejection?

If a claim is rejected, the insurer usually sends a “rejection letter” via the managing agent to the trustees. This letter sets out the reasons for the rejection and explains what recourse is available.

The trustees, acting on behalf of the body corporate, should consider whether the rejection is reasonable. Insurance advisors or brokers, like Addsure, are expected to guide the trustees and managing agent through this process. At Addsure, each claim rejection is carefully reviewed before it is forwarded to the client.

If the body corporate agrees with the insurer’s decision, and the owner does not, things get tricky. Technically, the trustees may close the matter. However, we recommend allowing the owner to submit a written appeal or motivation for reconsideration. Trustees should acknowledge this disagreement in writing, without implying endorsement, and allow the owner to escalate the matter if necessary.

Should the dispute proceed, the trustees are encouraged to attest to any formal submissions (rather than appear to approve them), in line with Prescribed Management Rule 10. This means documentation should ideally be signed by two trustees or one trustee and the managing agent.

When the trustees support the owner

If both the owner and body corporate disagree with the insurer’s rejection, the body corporate should formally notify the insurer, outlining their position and providing supporting documentation. This allows the insurer an opportunity to reassess the claim.

If the insurer maintains the rejection, the next step is to escalate the matter to the National Financial Ombud Scheme (NFO). Note: In the context of sectional title, any complaint submitted to the Ombud needs to be signed by two trustees or one trustee and the managing agent to be valid. As the body corporate is the insured party, any formal complaint, to be recognised, needs to originate from them, not the owner alone.

Addsure’s role

Addsure offers guidance and support to both trustees and owners during this process. In some cases, we provide reassurance that a rejection was fair. In others, where there is merit, we help clients negotiate with the insurer and navigate the path to dispute resolution and Ombud submission.