Who is Responsible? Cause of Damage and Insurance Cover

Thank you to everyone who responded to last month’s newsletter! There is so much uncertainty in this area and your questions help me to address the areas where information is needed the most.

In my last newsletter I only touched on identifying the cause and the responsible party, and also that insurance comes into play, at times.

Both Sectional Title and Home Owners Associations, are highly legislative environments, although different Acts apply. Common law governs much of everyday life, as a basic framework for what is fair and what is not – and also who is responsible for what. (Contracts can change the prescriptions of common law, to what the requirements are of the parties to the contract.). In the case of specific acts (statute law) like the Sectional Titles Schemes Management Act and the Companies Act, the common law will not apply where an aspect is addressed in specific legislation. In this case, the basic prescriptions (sections) of the Act cannot be changed, except where indicated (such as the prescribed Rules), the changes of which, still cannot overrule the Act itself.

A basic tenet of common law is that the person who is the cause of the damage, are liable for the cost of the repairs or replacement, whether it is his own loss or that of someone else. That is why we have insurance. We pay for someone else to accept that liability, in our place. Another newsletter will address insurance more fully, as it is a BIG subject on its own! For our purposes, we will consider the role that insurance plays in damage that may occur on common property, as well as on the inside of units. Both parties are insured under the body corporate insurance which gives great cover, but in which the parties must be clearly distinguished, as an excess payment is applicable on the party who suffered the loss and is covered by the insurance, within the one policy.

The insurance policy describes the details and conditions for cover and there is generally an excess payment, for which the person who is noted by legislation as the owner or responsible party, is responsible. The insurers will pay the amount of the loss, minus the excess payment specified (other conditions may also apply, such as maximums), which means that the loss is not fully covered. In some instances, one claim can have both the body corporate and an owner, or two owners receiving compensation under one claim. In such cases, the excess payment will have to be shared.

Hot water installations (geysers) are the responsibility of the owner of the unit, who will be liable for the full excess. Usually, a contractor will require that the excess payment be paid upfront before he starts with the work, but he may be prepared to wait for the settling of the claim, for the rest of the amount.

It also needs to be understood about which kind of insurance we are talking about. This is building insurance and covers the buildings and physical structures, including fixtures. It does not cover moveable items such as TVs, furniture, loose carpets, etc. Moveable items are covered by the short-term insurance of the owner of those items, which may include protection against other liabilities as well, but it is a personally held and paid for an insurance policy.

The many parties involved, and the responsibilities and exposure of each, are what causes confusion in body corporate losses and damages – which is what I want to try and bring some clarity to!

If damage occurs to common property, due to an incident (whether accidental, due to negligence or whatever reason), the body corporate has the duty to fix it, as it provides some kind of service to the owners. The body corporate has the right (and duty) to recover the expenses from the guilty party. It can claim directly and enforce it legally in a Court of Law. The same is the situation where an owner experiences damage from someone else. – BUT!

BUT, -where an insurance policy is in place, instead of the body corporate or the owner, claiming and suing the person responsible directly, where applicable, a claim can be lodged with the insurance company, which will cover the cost of the damage (less the excess) and the insurance company will do the work of recovering the expenses from the guilty party (recover its expenses in settling the claim). If the body corporate experienced the loss and the damage was caused by one of the owners, the excess payment or any short-fall, payable by the body corporate, can easily be recovered from the owner, by means of the levy account, and is specifically addressed in the STSMA.

If the parties involved are two owners, it is not as easy. It is a personal matter between the two owners and although the body corporate may have to be involved to some extent, to facilitate matters, the body corporate cannot recover the excess payment or any other damages of one owner, from another owner. The recourse for owners in such cases is the ordinary legal mechanisms and also the Community Schemes Ombud Services, which is a much cheaper and most effective, option.

Bodies corporate (correct term!) sometimes find that a person does damage to body corporate property and immediately offers to pay for the damages. Trustees must be VERY careful in these instances, as often these persons later turn around and deny responsibility. It may then, by that time, be too late to lodge an insurance claim (always register any claim as soon as possible!), and the body corporate will have to use expensive legal procedures to recover the costs. We suggest that trustees accept the offer, but immediately lodge the claim. If the person does pay for the damages, the claim can always be cancelled later.

I hope that, although this is very complicated, it will bring some light to the subject and help everybody to negotiate this difficult, and sometimes traumatic terrain effectively.

May you have a beautiful October, full of sunshine (and rain!), new life and blessings! (…and no losses or damages!)