By Auren Freitas dos Santos
One of the most important functions of a body corporate is to insure the scheme’s buildings. This function requires the body corporate to insure all parts of the scheme’s buildings and keep them insured to their full replacement value against fire, and perhaps other risks as prescribed or determined by members.
The function of insuring the buildings is a statutory obligation which every body corporate is required to perform. But what happens if an insurer is not willing to insure a scheme against a particular risk? For example, approximately 25% of the Gauteng Province, as well as parts of Mpumulanga, Limpopo, North West and Northern Cape Provinces, are situated above dolomite and as a result most insurers refuse to insure buildings against subsidence. Another example is schemes situated in areas of the country with a high risk of floods or lightning, which are similarly unable to obtain insurance against these types of risks.
Trustees who are concerned about the implications of being unable to insure the scheme’s buildings against subsidence, floods, lightning or any other particular risk must bear in mind that strictly speaking a body corporate is only under a statutory obligation to insure against one type of risk, namely, to insure the scheme’s buildings against the risk of fire (see section 3(1)(h) of the Sectional Titles Schemes Management Act).
In addition to the above obligatory building insurance policy, regulation 3 of the Sectional Titles Schemes Regulations lists seven other types of risks which a body corporate may insure against. The legislator’s use of the term “may” indicate that a body corporate is not obliged to insure against these additional risks, but rather that the members may resolve that the body corporate must insure against these risks or any further risks as the members may by special resolution determine in terms of section 3(1)(i) of the Sectional Titles Schemes Management Act.
An important principle for both trustees and individual owners to bear in mind is that section 14(1) of the Sectional Titles Schemes Management Act protects an owner’s right to insure against any damage to his or her section arising from risks not covered by the policy of the body corporate. In practice, owners of sections situated in problematic geographic areas are more likely to successfully obtain insurance against specific additional risks, when compared to the body corporate, and therefore in such a scheme the trustees could consider suggesting that the body corporate insure the buildings against fire damage only or those risks it can get cover for and informing the owners to obtain their own insurance against any additional risks which the body corporate is unable to insure against.