Always a good time to remind Scheme Executives and Owners in community schemes of the
legislated requirement for a scheme to have fidelity insurance in terms of the Community Schemes
Ombud Services Act and its Regulations.

This requirement is found in the regulations to the CSOS Act (Regulation 15 – Fidelity Insurance) and
applies to all community schemes.

However, in terms of Regulation 15.5, a community scheme is not obliged to obtain fidelity cover for
an insurable person if that person has delivered to the community schemes written proof that-

1. the monies of the community scheme are covered by fidelity insurance that complies with
   the requirements of sub-regulations (3) and (4); and
2. the insurer concerned has noted the community scheme’s interest in the application of
   the proceeds of the policy and undertaken not to cancel or withdraw cover without giving the
   community scheme at least 30 days written notice

CSOSA Regulation 15.1 requires that subject to sub-regulation (5), every community scheme must
insure against the risk of loss of money belonging to the community scheme or for which it is
responsible, sustained because of any act of fraud or dishonesty committed by any insurable person.

The regulation then defines what an insurable person means in Regulation 15.2 which includes (a)
scheme executive; (b) employee or agent of a community scheme who has control over the money
of a community scheme; (c) managing agent; or

(d) contractor, employee, or other person acting on behalf of or under the direction of a managing
agent, who in the normal course of the community scheme’s affairs has access to or control over the
monies of the community scheme.

Regulation 15.3 list the minimum amount of the fidelity insurance cover required as being the total
value of (a) the community scheme’s investments and reserves at the end of its last financial year;
and (b) 25 per cent of the community scheme’s operational budget for its current financial year.

Regulation 15.4 lists requirements that must be included in the insurance cover that includes (a)
provide for payment of a loss by the insurer to the community scheme within a reasonable period
after reasonably satisfactory proof of the loss has been furnished to the insurer; and (b) not require
that criminal or civil proceedings be taken or completed against the insured person before payment
is made under the insurance policy.

In addition to the CSOSA requirements, the STSMA requirement for the insurance of funds held by a
Sectional Title Body Corporate is found in the STSMA 3.1(i) and 3.1 (k), and additionally in
Management Rule 23 – Insurance, that is found in Annexure 1 of the Regulations of the Sectional
Titles Schemes Management Act.

(7) 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 because of any
act of fraud or dishonesty committed by a trustee, managing agent,
employee or other agent of the body corporate.

(8) A body corporate, authorized by a special resolution of members, may
insure any additional insurable interest the body corporate has–

1. in the land and buildings included in the scheme; and
2. relating to the performance of its functions, for an amount determined in that resolution.