Insurance today is about identifying risks and actively mitigating these risks before an insured event occurs. So too with Residential Sectional Title Insurance where things often go awry, and quickly so.
Let's be clear, Residential Sectional Title Insurance is about much more than burst geysers, but it is a good case study to pinpoint the pitfalls and the necessities in this line of insurance, since it is the leading cause of claims.
If not maintained, a geyser is a watery time bomb that can cause structural damage to the building and damage to other assets inside the unit. If it was found that the unit owner or body corporate neglected their duties in maintaining the geyser, it can be grounds for non-payment by the insurer.
To start, it is important to understand what the legislation around Residential Sectional Title says and what is expected of the trustees, and what individual owners are liable for when it comes to Residential Sectional Title Insurance.
According to the Sectional Titles Schemes Management Act, the insurance policies of the body corporate in terms of sections 3(1)(h) and (i) of the Act —
(a) must provide cover against —
(i) risks referred to in Regulation 3, which includes,
(a) lightning, explosion and smoke
(b) riot, civil commotion, strikes, lock-outs, labour disturbances or malicious persons acting on behalf of or in connection with any political organisation
(c) storm, tempest, windstorm, hail and flood
(d) earthquake and subsidence
(e) water escape, including bursting or overflowing of water tanks, apparatus or pipes
(f) impact by aircraft and vehicles, and
(g) housebreaking or any attempt thereat
(ii) risks that members resolve must be covered by insurance; and
(iii) risks that holders of registered first mortgage bonds over not less than 25% in number of the primary sections by written notice to the body corporate may require to be covered by insurance
With regards to a burst geyser, for example, the Act says it must be insured to the full replacement cost against bursting, which is subject to the trustees’ negotiation of excess premium and rate.
But here's the important bit, according to Section 31 contained in the Act, the owner of a unit, and not the body corporate, is responsible for the maintenance of the geyser. Bearing in mind that Residential Sectional Title Insurance only covers fixed assets inside the unit, unit owners must ensure that any moveable asset is insured under their personal insurance.
Maintenance and upkeep
The maintenance and general upkeep by the body corporate and individual owners of property is thus an essential component, if not the most important, of Residential Sectional Title Insurance.
Legislation around this stipulates that the body corporate is liable for the repair, maintenance, management and administration of the common property, including reasonable provision for future maintenance and repairs. And again, failure to do so can be grounds for a denial of claim by the insurer.
Furthermore, unit owners must be made aware of the importance of the upkeep of geysers as it could lead to consequential loss and frustration to individual unit owners but others as well.
It is thus imperative that brokers look to insurers who, along with comprehensive insurance coverage, also manage and set up a maintenance reserve fund account, maintain and arrange for repair services where the body corporate has insufficient funds, assist with arranging maintenance work, and are willing to provide a guarantee on all maintenance and repairs as arranged by the insurer.
At Constantia, we offer a drafting service, which includes a 10-year Maintenance, Repair and Replacement Plan that is logged and tracked on a shared digital platform. All repairs and maintenance done through our platform is guaranteed by us, which includes preventative repairs and replacements of geysers to reduce the risk of burst geysers.
The Constantia guarantee, for instance, applies to the maintenance work that the Body Corporate authorises to the building, such as the repair of boundary walls, paving and painting, among others.
If required, we will install a monitoring device in each geyser on the property, which monitors the health of the geyser. It is usually corrosion that leads to the bursting or leaking of geysers, which can be avoided with regular maintenance and monitoring through technology.
Insurance today is about more than simple coverage, it's about actively managing risk before it boils over into an incident.