INSURANCE: Community Schemes – Repudiation of Insurance Claims due to Non-Compliance with Legislation and failure to Maintain
The elected scheme executives (and even owners) have a fiduciary duty to ensure that the scheme and buildings in the scheme that they are required by legislation to properly maintain and to insure, comply with all regulations that govern that particular building in terms of National Building Regulations, Municipal By-Laws, Health and Safety Legislation, South African National Standards, Emergency Services Fire Safety Compliance and any other relevant legislation, so as to ensure that an insurance claim is not rejected.
One of the schemes we manage had a major fire that affected several buildings in the scheme. The insurance claim was substantial but unfortunately there was a lengthy delay in settling the claim as the insurer tried by whatever means to wriggle out of settling the claim, due to several irregularities that their fire claims inspector assessed as being not compliant with the National Building regulations, Municipal By-Laws, and the South African National Standards.
All insurance claims for damage to buildings are assessed by an inspector (usually a highly regarded expert) appointed by the insurer. Where any material breach of legislation or regulations regarding construction, maintenance and safety of the buildings are found, despite these having been obvious or seen by the insurer’s assessor when taking on the insurance, the insurer may be entitled to reject such claims.
The same applies if the building area has not been correctly maintained and where necessary repaired correctly in accordance with the specifications of the supplier.
For scheme executives to claim ignorance of these requirements is no excuse. Failure to comply with legislation, regulations and standards may compromise the property owners at the claim stage.
Insurers usually hold property owners responsible for ensuring that their buildings are maintained, and kept in a safe and compliant state, or else a claim can be repudiated. It is the property owner’s responsibility, and in the case of a community scheme’s buildings and the common property, the Scheme Executive’s responsibility, to do everything possible to prevent damage, loss, or bodily injury on their property.
Typical examples of non-compliance where buildings are damaged that could result in an insurance claim being repudiated:
•  Non-Compliant Plumbing installations – usually geysers.
•  Non-Compliant Electrical Work with no Certificate of Compliance.
•  Collapse of walls, where incorrect building practices and standards are shown to
    to be the cause.
•  Fire damage and spread of fire, due to poorly positioned or inaccessible
    firefighting equipment, or water pressure that is insufficient.
•  Lack of adequate firebreaks between buildings or between roof areas.
•  Injury to persons falling down a staircase with incorrect or missing handrails.
•  Incorrect access design to allow emergency vehicles to access the property.
•  Lack of water pressure at the fire hydrant, or where the hydrant valve is closed.
Scheme executives should try by whatever means to get hold of a copy of the approved building plans and the occupation certificate from the building control officer, and in addition all compliance certificates (plumbing, electrical, electric fence, gas) as well as a copy of the rational fire design (if one was done), and fire protection equipment servicing certificates.
