For Trustees

Besides the important responsibility of insuring the buildings, trustees also need to arrange Fidelity cover, cover to protect the body corporate against losses as a result of fraud or dishonesty.

Prescribed / standard rules are very clear on this in that the trustees should see to it that a general meeting decides on how much, if any, fidelity cover is required.

Rule 29.2.b is quite specific about this. One cannot only rely on the EAAB Fidelity fund as the EAAB fund covers certain circumstances and only really responds after all avenues of recovery are exhausted and that usually takes years.  Yes, managing agents must have their fidelity fund certificates, but over and above that, trustees should be arranging the wider cover as prescribed in the rules.

Cover can be expensive; however, if the professional managing agent has purchased a package of professional indemnity and fidelity cover, Any single body corporate under their wing may be able to purchase such cover for a very reasonable premium. 

Recent losses experienced by many bodies corporate recently may have already have been reinstated (funds reimbursed by insurer) had the trustees of these bodies corporate taken this rule seriously. Don’t get caught again!

Trustees should ensure that this matter be raised / put on the agenda at their next general meeting and the amount of fidelity cover decided upon.

Pending this general meeting, it would be prudent for trustees to meanwhile purchase fidelity cover to at least cover the maximum amount of funds held in current and investment accounts, whether in trust accounts or not.  Addsure offers FIDCURE Fidelity guarantee cover for a minimum R1,000,000 cover at a cost of R2,000 per annum or less than R200 per month. This is subject to that body corporate’s managing agent to have the PIMA Fidelity Guarantee themselves and the body corporate’s application approved by the underwriters.

Statistically, bodies corporate or more at risk for events of fraud and dishonesty than fire. Trustees should pay more attention to this.

In recent cases where huge  losses are experienced by bodies corporate (fraud or dishonesty), and trustees have not taken their fiduciary duty seriously, trustees in these cases could be found to have been grossly negligent.  According to industry experts, the “grossly negligent” question is raised “whether the trustees at the affected buildings were grossly negligent for blindly.
We at ADDSURE feel that where the rule about this cover  (rule 29.2b) has been ignored i.e. Fidelity Cover NOT considered at a general meeting – the gross negligent issue here could become a bigger question.

RULE 29.2(b)
(2) At the first meeting of the trustees or as soon thereafter as is possible, the trustees shall take all reasonable steps-
(b) to procure to the extent, if any, as determined by the members of the body corporate in a general meeting, a fidelity guarantee in terms of which shall be refunded any loss of moneys belonging to the body corporate or for which it is responsible, sustained as a result of any act of fraud or dishonesty committed by any insured person being any person in the service of the body corporate and all trustees and persons acting in the capacity of managing agents of the body corporate; and for managing agents.

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