Can trustees change the body corporate's insurance, or must this decision be made by the owners at a general meeting?
ELA
EstateIQ Legislative Assistant
A change in the body corporate's insurance provider can be decided by the trustees, but only within the limits of their delegated authority and subject to specific requirements for member involvement regarding insurance cover.
Under Management Rule 23(3), Annexure 1, the trustees must obtain a replacement valuation of all buildings and improvements to be insured at least every three years, and this valuation must be presented to the annual general meeting (AGM). However, the legislation does not require that the specific choice of insurance provider be approved at an AGM.
Crucially, certain insurance matters must be determined by members in a general meeting:
- The amount of public liability insurance must be determined by members in general meeting (not less than R10 million) — Management Rule 23(6), Annexure 1.
- The amount of fidelity insurance (to cover loss of funds due to fraud or dishonesty) must also be determined by members in general meeting — Management Rule 23(7), Annexure 1.
- Any additional insurance beyond mandatory cover requires a special resolution by members — Management Rule 23(8), Annexure 1.
In Summary
- Trustees may decide to change the insurance company.
- However, they must ensure the new insurance policy complies with cover amounts and risks as approved by members at general meetings.
- Trustees must report insurance decisions to the AGM and act within any restrictions or directions imposed by members in general meeting under Section 7(1) of the Act.
ELL
EstateIQ Legal Lookup
📘 Legislative References
Management Rule 23(3) (Annexure 1)
A body corporate must obtain a replacement valuation of all buildings and improvements that it must insure at least every three years and present such replacement valuation to the annual general meeting.
Management Rule 23(6) (Annexure 1)
A body corporate must take out public liability insurance to cover the risk of any liability it may incur to pay compensation in respect of—
23(6)(a): any bodily injury to or death or illness of a person on or in connection with the common property; and
23(6)(b): any damage to or loss of property that is sustained as a result of an occurrence or happening in connection with the common property, for an amount determined by members in general meeting, but not less than 10 million rand or any such higher amount as may be prescribed by the Minister in any one claim and in total for any one period of insurance.
Management Rule 23(7) (Annexure 1)
A body corporate must take out insurance for an amount determined by members in general meeting to cover the risk of loss of funds belonging to the body corporate or for which it is responsible, sustained as a result of any act of fraud or dishonesty committed by a trustee, managing agent, employee or other agent of the body corporate.
Management Rule 23(8) (Annexure 1)
A body corporate, authorised by a special resolution of members, may insure any additional insurable interest the body corporate has—
23(8)(a): in the land and buildings included in the scheme; and
23(8)(b): relating to the performance of its functions, for an amount determined in that resolution.
STSMA Section 7(1)
The functions and powers of the body corporate must, subject to the provisions of this Act, the rules and any restriction imposed or direction given at a general meeting of the owners of sections, be performed and exercised by the trustees of the body corporate holding office in terms of the rules.