FURTHER INFORMATION IN DEALING WITH INSURANCE CLAIMS
Dealing with insurance claims is often misunderstood in sectional title and very quickly leads to conflict and unpleasantness.
Knowing the basics and understanding the process certainly assists owners and trustees from an expectation point of view.
We all understand that the body corporate is the insured. The owner’s have certain rights and interests in the policy, however, sectional title legislation is designed in a way that the trustees arrange and deal with the insurance. This includes claims / reinstatement.
The trustees must insure the buildings (to full replacement value) and some other risks and negotiate premium, excess and rate on behalf of the body corporate. Premium, excess and rate can only be negotiated properly (usually annually) where trustees have an understanding of claims ratio and are properly guided by their managing agent and/or insurance advisor. Trustees need to be aware of the claims on an ongoing basis as they are overseeing the insurance and claim aspects – according to the Sectional Title Act.
Prescribed / Standard Management Rules also spell out that no document signed on behalf of a body corporate is valid or binding unless signed by two trustees or one trustee and the managing agent.
This implies that in order for a claim to be valid and binding, the claim form must be signed by these persons. Not always easy, hence many managing agent contracts provide for the delegation of this to the managing agent, however we advise that the trustees ratify these where possible say at the next trustee meeting, etc.
Where does this leave call centre claim systems? We don’t think call centres fit in with sectional title legislation at this stage.
We are seeing a trend whereby owners are sometimes able to claim via a claims call centre from the body corporate’s policy. This does not constitute a valid and binding claim in our view, first off, but more importantly, the trustees and/or the managing agent have a responsibility to manage the policy and the claims thus it is critical that there be a management structure for these claims. It is common knowledge that in many cases, minor claims are not assessed and “naughty owners” know this, at the expense of the other owners and prudent trustees. Claims via call centres by-pass the management process.
If claims are submitted properly, i.e. on a properly prepared claim form via the trustees / managing agent / broker, a good broker / insurance advisor can properly advise and filter claims so that claims are submitted correctly and efficiently (i.e. properly completed and in order). Incorrectly completed claims often result in repudiation where claims should have been admitted. A good broker coaches and assists clients in the process.
There are plus factors for call centres, fast reporting, mitigation of further losses in some cases, paperless and easy. There is also the argument that owners have a right to claim. Of course they do, but via the body corporate. The owner is not the insured, but they have a right. Indeed, policy definitions might say otherwise, but the insured is the body corporate and the body corporate needs to manage its own policy.
We feel that geyser call centres are acceptable as owners are responsible for geyser maintenance in any event.
To put it in perspective, the owner involved in a claim with regards to damage to his/her section provides the body corporate with the evidence i.e. proof of the claim and signs as such. A blank claim form should be easily available to the owner for this purpose. The claim form should be completed in the hand of the owner (person providing the evidence / proof) and then give to the trustees or managing agent as soon as possible together with invoices / quotes / damage report in support of the claim. The trustees or managing agent then see to it that the responsible signatories validate the claim and submit to the insurer, usually via the broker.
The insurer will then either immediately admit the claim, or if larger, appoint an assessor/loss adjuster to verify the claim on behalf of the insurer.
Claims must usually be submitted within 30 days of a claimable event taking place – usually a condition of the policy.
Once submitted, the process is very quick provided all proof of claim is correctly collated and the claim form properly completed and signed. In many cases, the insurer will settle the claim straight away, often within 48 hours. Larger or more complex claims need the appointment of a loss adjuster. This appointment of the loss adjuster can also happen with a short period but sometimes such claims can take much longer to finalise. This will certainly be the case where contractors are required to verify quotes, resubmit specifications etc. and then of course, the loss adjuster prepares a report for the insurer with his / her recommendations.
Once finalized, the insurer will either pay a claim, pay a negotiated adjusted claim sum or reject a claim.
As the body corporate is the insured as far as the insurer is concerned. Any disagreement or dispute from an owner’s point of view would need to be taken up by the body corporate on that owner’s behalf. If the body corporate disagrees with that owner, it is my opinion that the dispute is then between the owner and the body corporate, not the individual owner and the insurer. The trustees do need to maintain control in the interests of all owners, however, the individual needs to be aware of his/her rights and the procedures to follow when he or she feels wronged. A good broker can often informally mediate and assist in this process.
We suggest that each body corporate set up their own claims procedure to suit the needs of their own environment. Some bodies corporate have estate managers, other managing agents as well, some are self-managed.
Some examples of usual claimable vs non claimable events:
Damage to the building which occurred suddenly and unforeseenly and directly by events as listed below may typically be claimable:
- Fire, lightning, explosion
- Wind, hail, storm, snow
- Burst pipe – not as a result of wear and tear
- Burst hot water cylinder
- Impact such as a car colliding with gate / wall
- Accidental damage, e.g. spillage of paint on carpets
- Flood, sudden water damage
- Damage caused as a result of break-in
Damage or losses caused as a result of wear and tear, ageing, maintenance related, occurring over a period of time would ordinarily not be covered.
Typically, the following common losses ARE NOT ordinarily covered:
- Water penetration over time caused by failing waterproofing
- Water damage occurring “whenever it rains” due to leaking balcony from flat above
- Damage to ceilings, over time, due to bath trap or shower above leaking
- Damage to pipes, seeking the leak and repairs where pipes are old, rusty, leaking, have pinholes.
- Cracks appearing in tiles and walls unrelated to any specific claimable event
- Seeping of water, dampness, mould as a result of leaking pipe or pipe with “pinholes”
- Rain damage as window sill not waterproofed properly
- Damage resulting from poor workmanship
- Damage to a car after wind causes a roof tile to be lifted and fall
- Damage to an owner’s contents following a storm, fire, etc.
- Damage caused by tree roots growing into pipes over time
Parts of the building may not be covered or fall within the definition of buildings, e.g. thatch, canvass awning, signage, certain glass fronts, retaining walls, garden features, wooden decks and balustrades, etc. Note that theft from the buildings, i.e. theft of copper pipe, gate motors, cameras, air conditioner parts etc would also not be covered as a default. Theft is not a requirement in terms of prescribed rules however, can be requested. Trustees and owners need to be aware and enquire as to what may or may not be covered against theft.
What is important to remember, is that the policy is there to protect the body corporate and the owners collectively. It is not intended to protect third parties and/or tenants. Where an owner or tenant suffers damage to their assets, e.g. gate closing on car, material blown onto vehicle during a storm, unless they can find some reason to find the body corporate legally liable, the sectional title policy will not respond. The policy is there for the body corporate’s buildings. The body corporate should also carry liability cover which protects the body corporate against claims being made against it. Should a third party bring action against the body corporate for damages, e.g. a letter of demand for damages, the body corporate’s insurer will defend the action or seek a settlement – whichever seems most appropriate and cost effective. When these arise – Addsure should be notified immediately – liability claims are more complicated and definitely needs expert input.
In summary, the body corporate is the insured. Section 37 as well as prescribed rules put the responsibility of managing the insurance with the trustees. Claims should in reality, flow via the trustees and/or their delegated managing agent so that a certain measure of control / claims management structure is in place. Trustees should not decline claims per say, however, can prevent unnecessary claiming if something is clearly not a claim, e.g. repair of roof needing fresh waterproofing material.
It is suggested that a claims procedure be communicated to owners so that owners understand what they should do when a claimable event arises.