The nature of insurance cover provided under a community living policy

Abstract

The question arises as to the nature and extent of insurance cover required for sectional title schemes, the responsibility of ensuring same is in place and adequate and whether the current format and requirements can be considered best practise, considering the wide extent of interests involved. The purpose of Sectional Title insurance is to protect property owners in a sectional title scheme from damage to their property caused by an uncertain event which may occur sometime in the future. Given the number of role players involved in a sectional title scheme, including numerous owners, tenants, banks and managing agents it may be much more complicated in practise than other forms of insurance. Sectional title schemes are currently regulated by the Sectional Titles Schemes Management Act (STSMA) and the Community Scheme Ombud Services Act. The STSMA management rules require trustees to ensure adequate insurance, to full replacement value, against prescribed risks, but have added refinements such as prescribing minimum cover for liability insurance and compulsory fidelity insurance cover from previous requirements. The number of assets owned by different parties can lead to substantial conflict at claims stage, especially when a number of different units belonging to different owners are affected, when questions of maintenance, or lack thereof, arise at claims stage, or even when requirements relating to the submitting of claims are concerned. Insurable interest questions may also arise around these same issues, especially when units are tenant and not owner occupied, when managing agents are administering the claims process on behalf of the body corporate and when the trustees are, in turn, acting for unit owners. Regulations as they currently stand consider the best interests of a body corporate, as opposed to the sum of its parts, and should with the myriad of interests involved be considered the most effective way of dealing with sectional title insurance.