As a Juristic Person, your obligation regarding insurance is not necessarily to insure individual units for their “actual value” (a term that can be ambiguous), but rather to fulfill your fiduciary duty by securing appropriate and prudent insurance for the common property of the condominium.
Here is a breakdown of your legal and ethical obligations:
1. Primary Obligation: Insure the Common Property, Not Individual Units
The core mandate of the Juristic Person is defined by the Thai Condominium Act B.E. 2522 (1979) and the specific regulations of the condominium’s by-laws.
- What is Common Property? This includes the main structure of the building (foundations, load-bearing walls, beams, roofs), common areas (lobby, hallways, elevators, swimming pool, gym), and common systems (main plumbing, electrical systems, central AC system for common areas).
- Your Duty: You are legally obligated to take out a master insurance policy that covers the common property against standard perils like fire, explosion, lightning, storm, flood, and other risks as defined in the policy.
- The “Value” in Question: The policy should cover the full reinstatement or replacement cost of the common property. This is the cost to rebuild the common areas from the ground up at current construction prices, including debris removal, architect fees, and permits. It is not the market value of the entire condominium (which includes land value) or the sum of the individual unit values.
2. The Critical Distinction: Common Property vs. Unit Owner’s Property
This is where confusion often arises. The Juristic Person’s policy typically stops at the original internal surfaces of the unit (the “bare walls”).
- Juristic Person’s Policy Covers: The building structure, common areas, and the original fixtures as built (e.g., the original bathroom tiles, the original kitchen sink provided by the developer).
- Unit Owner’s Responsibility Covers: Everything inside that isn’t original, including:
- All personal belongings (furniture, electronics, clothing).
- Interior renovations and improvements (wooden flooring, custom-built kitchens, upgraded bathrooms, wallpaper).
- Their own civil liability (e.g., if their renovated bathroom floods and damages the unit below).
Therefore, your obligation is not to insure the owner’s personal property or improvements for their “actual value.” That is unequivocally the owner’s responsibility.
3. Fiduciary Duty: To Act Prudently and in the Best Interest of All Co-Owners
Your obligation is to exercise due care and diligence in arranging the master policy. This means:
- Adequate Sum Insured: Ensuring the sum insured is adequate for the full reinstatement cost of the common property. Under-insuring is a severe breach of duty. If a loss occurs and the insurance payout is insufficient, the Juristic Person (and ultimately all co-owners) could be liable for the shortfall through a special assessment.
- Accurate Valuation: It is considered best practice to periodically (e.g., every 2-3 years) obtain a professional valuation or have a quantity surveyor assess the rebuilding cost to ensure the sum insured remains accurate amidst inflation and changing construction costs.
- Appropriate Coverage: Selecting a policy with comprehensive coverage that is suitable for the specific risks faced by the condominium (e.g., including flood coverage if in a risk area).
- Transparency: Clearly and regularly communicating to all co-owners:
- What the master policy covers (the common property).
- What it does not cover (their personal belongings, improvements, and liability).
- The importance of them obtaining their own Condo Owner’s/Householder’s insurance policy to cover the gaps.
Summary of Obligations:
| Obligation | Description | Why It’s Important |
|---|---|---|
| Legal Compliance | Secure a master insurance policy for the common property as mandated by the Condominium Act and building by-laws. | To fulfill your legal mandate as the Juristic Person. |
| Fiduciary Duty | Act prudently by ensuring the sum insured reflects the current reinstatement cost of the common property. | To avoid the severe financial risk of under-insurance for all co-owners. |
| Clear Communication | Educate owners on the limits of the master policy and their responsibility to insure their own unit’s contents, improvements, and liability. | To manage expectations and prevent disputes after a loss occurs. |
| Avoiding Overstepping | Not to insure the individual units’ contents or “actual value,” as this is the owner’s personal financial responsibility. | To avoid misusing the condominium’s common funds for a purpose they are not intended for. |
In conclusion: Your primary obligation is to be a prudent manager of the common property insurance. You must insure the common property for its accurate reinstatement value. You have no obligation to insure an individual owner’s unit for its “actual value,” as this is a private matter for each owner to address. Your duty is to make this distinction clear and encourage owners to protect themselves accordingly.
