Public liability insurance and fidelity cover

What is the difference between Fidelity insurance and Public liability insurance and how does this work for a Body Corporate?

What is the difference between Fidelity insurance and Public liability insurance and how does this work for a Body Corporate?

Public liability:

PMR 23 of the STSM Act

(6) A body corporate must take out public liability insurance to cover the risk of any liability it may incur to pay compensation in respect of—

  • any bodily injury to or death or illness of a person on or in connection with the common property; and
  • any damage to or loss of property that is sustained as a result of an occurrence or happening in connection with the common property,

for an amount determined by members in general meeting, but not less than 10 million rand or any such higher amount as may be prescribed by the Minister in any one claim and in total for any one period of insurance.

Fidelity insurance:

Regulation 15 of the CSOS Act

(1) 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 as a result of any act fraud or dishonesty committed by any insurable person. 

(2) For the purpose of sub- regulation (1) “insurable person”   means any-

(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 affair has access to control over the monies of the community scheme. 

(3) The minimum amount of the fidelity insurance cover required in terms of sub-regulation (1) is the total value of-

(a) The community scheme’s investments and reserves at the end of its last financial year;

(b) 25 percent of the community scheme’s operational budget for its current financial year. 

(4) The insurance cover referred to in sub-regulation (1) must-

(a) Provide for payments 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. 

(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-

(a) The monies of the community scheme are covered by fidelity insurance that complies with the requirements of sub-regulations (3) and (4); and

(b) The insurer concerned has noted the community scheme’s interesting 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.

So the requirement for Public liability insurance is a legislative requirement for all Bodies Corporate and Fidelity cover is a legislative requirement for all Community Schemes.

But what is Public liability insurance and what is Fidelity cover?


Public liability insurance is designed to protect a body corporate / HOA / Shareblock from claims by visitors or tenants in the event of accidental death, bodily injury, illness or accidental loss or damage to the property of another party who is not an owner at the complex.


It is now compulsory for all community schemes to have fidelity insurance so they are covered if their money is lost through theft or fraud committed by a scheme executive or a managing agent.

Public liability cover is a standard item in most Sectional Title insurance policies.

In terms of Fidelity cover Trafalgar has cover in place for our schemes of R20 million per annum.  Should the schemes require more cover we can obtain quotes through TFS.

Quote from the STSM Act:
PMR 21(3)

  • invest any moneys in the reserve fund referred to in sections 3(1)(b) of the Act in a secure investment with any institution referred to in the definition of “financial institution” in section 1 of the Financial Services Board Act, 1990 (Act No. 97 of 1990);

Before 1997 the Act stated that any funds not immediately required for disbursement may be invested in a savings or similar account with any building society or any other registered deposit receiving institution approved by the Trustees from time to time. In 1997 it was amended to state that it may be invested with any registered building society or bank.

The STSM Act also stipulates that there should be separate bank accounts for the Administrative Fund and the Reserve Fund.

Quote from the STSM Act:
PMR 26(1)    A body corporate must—

  • keep separate books of account and bank accounts for its administrative and reserve funds referred to in sections 3(1)(a) and (b) of the Act;

Our Trust account is used as the bank account for the Administrative Fund and we then open a separate investment account for the Reserve Fund.  We also operate on the system of having a second investment account in the name of the BC for day to day surplus funds that are not part of the Reserve Fund.

We have the option for our BC’s to open an investment account with Investec or Nedbank.  It is in the name of the BC and covered by the EAAB Fidelity Fund and our own PI cover.

The BC also do not earn interest on the monies sitting in the Trust account so it is important that surplus funds be transferred monthly to the investment account.