Use of Insurance Claim Money

Use of claims payments and why it is preferable to pay directly into the Body Corporate or Managing Agent's trust account

Section 37 (1) (h) of the Sectional Titles' Act mentions that all insurance monies received must be used for the reason of the claim in respect of damages.

In other words, the money paid out cannot be used for anything else and must be used to reinstate the damaged property. If, for example, the gate motor is stolen and the claim is paid out, the trustees must utilise those funds to replace the motor.

Some complexes have such inadequate levies that they make use of these funds for the daily running of a complex – which is not legal. Likewise, if a claims payment is in the hands of the owner, the monies may possibly not be used for the purpose for which it was intended and the damage remains, deteriorating further – to the financial detriment of all the owners as the building falls into a state of disrepair.

It is for this reason that it is preferable for claims payments to be made directly into the bank account of the Body Corporate or the Managing Agents trust account to ensure the funds are utilised for the purpose for which they were intended.

The views contained herein are that of Biccari Bollo Mariano Inc , a firm of attorneys specialising in Sectional Title Legislation. For more information on this issue please contact: