Who is responsible for an insurance claim in a sectional title scheme?
When faced with an insurance claim, owners of sectional title units, aware of the fact that a portion of their monthly levies are allotted to insurance premiums, are often unsure as to who is ultimately responsible for their claim.
The Sectional Title Schemes Management Act (the ‘STSMA’) provides that the body corporate of a sectional title scheme is responsible for the control, administration, and management of the common property of a sectional title scheme for the benefit of all owners.
To fulfill this responsibility, the STSMA provides that the body corporate must perform certain functions including, among other things, the establishment and maintenance of an administrative fund, which is reasonably sufficient to cover the estimated annual operating costs. The administrative fund is comprised of levies paid by the owners in proportion to their participation quota in the scheme.
One of the operating costs referred to in the STSMA is the payment of any insurance premiums relating to the building or land. The Sectional Titles Act defines ‘‘building’’ as a structure of a permanent nature erected or to be erected and which is shown on a sectional plan as part of a scheme, and “land” as the land comprised in a scheme as shown on a sectional plan.
But it begs the question: to what extent does the insurance policy, taken out by the body corporate, cover an individual section?
The STSMA places an obligation on the body corporate to insure all buildings within a scheme, however, this type of insurance typically only covers the buildings themselves, i.e. brick and mortar, fixtures and fittings, and the common property. The obligation on a body corporate to insure the buildings in a sectional title scheme, according to the Western Cape Division of the High Court as stated in Prag N.O and Another v Trustees for the time being of the Mitchell’s Plain Industrial Enterprises Sectional Title Scheme Body Corporate and Others, is directed at “protecting the common interests of owners in the scheme and not the personal interests of an individual owner”.
Some of the examples of the types of damage typically covered by sectional title insurance include: damage to the external façade of the building, structural damage, built-in cupboards and bathroom fittings, ducted air conditioners, intercom systems, outbuildings, or damage to improvements to the common property such as an electric gate motor, communal swimming pool, or elevator.
Damages that are typically not covered by sectional title insurance include: temporary walls, internal window coverings such as curtains and blinds, temporary ceilings, temporary floor coverings, air conditioners that are not permanently mounted, or appliances that are not permanently mounted such as washing machines, microwave ovens, and tumble dryers.
Individual owners, obligated by the STSMA to repair and maintain their own sections in a state of good repair, must therefore ensure that they effect an insurance policy in respect of their sections to cover any damage arising from risks not covered by the insurance policy effected by the body corporate.
Written by Bianca Ford
This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE).