It is stated in paragraph 40.3.a of the Sectional Title Act that –
A trustee of a body corporate whose mala fide or grossly negligent act or omission has breached any duty arising from his fiduciary relationship, shall be liable to the body corporate for any loss suffered as a result thereof by the body corporate (…).
Furthermore, Management Rule 29 of the Sectional Title Act states that – as part of his or her fiduciary duty – it is the trustee’s responsibility to ensure that the body corporate has adequate insurance cover. Therefore, it is vital that the sum insured agreed upon at the AGM makes provision for all costs associated with reconstruction – this includes demolition, rubble removal, professional services, additional building services and inflation of costs since policy inception.
The trustees have the responsibility to present at the AGM a schedule reflecting an estimate of the replacement value of each section and all common property for approval by the body corporate. In carrying out their duty, the trustees may task the managing agent with preparing the Schedule of Replacement Values, or ask the insurance broker for assistance. In the first step, the managing agent or insurance broker will usually recommend that a professional valuer be consulted for the complex’ true replacement value.
Even if the suffered loss or damage is only partial, the claim will be subject to average if the body corporate is found to be underinsured. In this event, the trustees will be held accountable by the affected unit owners.
Contact our offices at I&DRS should you require a quote from our specialised Building Insurers and Valuators.