Trustees need to ensure that Liability Cover is in place – prescribed management rule (PMR) 29.2(a). Trustees are obliged to arrange liability cover, protecting the body corporate and the trustees against liability in respect of injury or damage to property occurring in connection with the common property.
And the Managing Agent / Portfolio Manager? The short answer: “In the same boat”. How so when the body corporate and the trustees are ultimately responsible? Yes, depending on the duties specified in the contract, maybe the courts would not find the managing agent responsible. However, they can definitely find themselves in the same courtroom as the trustees. Sectional title legislation in fact provides for the managing agent’s appointment. The trustees are empowered to appoint such an agent “in connection with the control, management and administration of the common property”. In the same case referred to above, the managing agent found themselves in court although, in this case, to the contrary, the judge in fact complimented the managing agent for her competence. The managing agent was able to show that they were contracted in an administrative role only and presented very thorough records and minutes for points of reference. Managing Agents can better protect themselves and their practices by way of insurance policies such as PIMA (Professional Indemnity for managing agents) and D&O (Directors and Officers Liability Cover).
There is a lot to be said about this duty of care and who is responsible and which tasks are delegated. Much can also be said for the various insurance products available to cover trustees and managing agents against liability claims. There are some huge differences and gaps in certain policies and most especially in the wording of liability and definitions, which can have a devastating impact at claim stage. It is thus very important to engage the services of an insurance advisor who is au fait with sectional title legislation and the gaps in cover and exclusions in policies offered by certain sectional title underwriters. Written advice from such a broker/advisor is key.
Trustees need to remember that there is not only building cover to consider, but liability and fidelity cover as well. If trustees only take care of the buildings cover, they have one dealt with one of the three important aspects of insurance i.e. 1) BUILDINGS (PMR 29.1), 2) LIABILITY (PMR 29.2(a)) and 3) FIDELITY (PMR rule 29.2(b)).
The views expressed in this article are of Mike Addison – co-owner / director at ADDSURE, a sectional title insurance specialist. Addsure can be found via www.addsure.co.za.
Article reference: Volume 8, Issue 12, Page 2