By Bruce Gibson
The intention of the Sectional Title policy is to insure the buildings/structures relevant to the body corporate, as required by Prescribed Management Rule 29 of the Act.
It is therefore, clear that the washing machine, not being part of the body corporate property, cannot form part of the sectional title policy. However, water is an insured peril and as such the body corporate should have a valid claim for the damage caused by the faulty washing machine.
The two main issues that need to be considered are:
(i) the matter of “…sudden and unforeseen…” and
(ii) the question as to who is responsible for the excess applicable.
The wording of the general policy reads: “…water (damage)…other than…gradual deterioration….”. From this it is clear that, if the leakage occurred over a period of time, there is an element of gradual deterioration because the damage was aggravated due to the time factor. Clinically speaking, insurers might argue that they were prejudiced because, had the loss been discovered and submitted earlier to insurers, the damage would have been much less. However, experience would indicate that insurers tend to be lenient in this regard, accepting that this kind of leakage it is not always noticeable until the damage becomes apparent. They then accept that the date of discovery will be the date of the loss. Assuming that the insurers will accept the resultant damage, we now turn to the Prescribed Management Rule 29.4 of the Act: Dealing with the excess applicable.
This Rule states that each owner is responsible for the excess applicable to his/her section. This means that the two sections involved in the example used here have to share in the excess applicable, proportionately to the amount of damage in each section. This might seem to be unfair but unfortunately this is what the Act prescribes. In practice, we know that very few bodies corporate actually apply the Rule. It must be noted that the Rule does not affect insurers as the insurance policy simply settles the claim with the body corporate, less the excess.
Article reference: Paddocks Press: Volume 7, Issue 12, Page 2
The views expressed in this article are of Bruce Gibson – a sectional title insurance specialist at AddSure Insurance Brokers (www.addsure.co.za).
This article is published under the Creative Commons Attribution license.