Please make sure your builders are insured Post Reply

[tooposhtopush]

Hello All
This story in the Evening Standard is a really awful example of why you need your builder to be insured.

I do hope that they manage to claim some funds from their insurance company but at present it looks like a disaster.

I know this isn't a Nappy Valley local story but it's a salutary lesson

http://www.standard.co.uk/news/london/c ... 09942.html

[jameslavers]

If I can add my two pence worth to this story, I am a director of a Wandsworth based insurance brokerage (Insurance Tailors) and one of the things we specialise in is large scale renovations/ project works insurance.

As most people are aware, basement digouts and large scale renovations in London are commonplace these days but most are insured completely incorrectly and can lead to devastating ends, like the story attached.

As part of a survey we conducted for the Sunday Times, we found that 95% of home owners are either under or total uninsured during their works. It is because they think that their household insurance will cover the existing structure and then the builder will be insured for anything else that might go wrong.

There are two significant problems here, firstly, if the works are of any significant scale (i.e. structural and over £100,000) then all household insurers will either come off cover straight away or limit cover drastically, leaving the property exposed and the home owner in breach of mortgage terms. If you simply do not tell them then you probably will be uninsured and the policy made void, which can lead to more serious implications.

By relying on the builder insuring the works, you are presuming that they have the right cover, with the appropriate insurer, have made the correct declarations about the work they do, number of employees and payments to them and are paying their premiums. Also by relying on their contract policy any claims money will go straight to them, unless you jointly named insured on their policy and I am sure if they have burnt down your house, I am not sure you will want those builders returning to fix the problem!

The correct way of insuring the property during insurance is to take out a renovations/ project works insurance that cover the existing structure and contract works on a comprehensive basis on a single policy in your name and control for the length of the works. The contractor would still need his own liability insurance and worth checking a copy of this but this way it is not only the most comprehensive way of covering the works, it is usually the only way.

If there are any party walls involved as part of the project, like the above, then Non Negligence party wall insurance is usually also a must, especially if you are doing a basement digout.

For more info please feel free to get in touch:
jlavers@insurancetailors.com
02071993255

[atbattersea]

As jameslavers points out, checking the builder's insurance may be trickier than it seems - have they paid their premiums as required, is the cover adequate, have they properly declared the type of work they do. And all the time the insurance company will have a team working out how they can wriggle out of any liability.

Probably the only way to do this properly is to arrange your own insurance.

The other things to bear in mind are: is the building firm a limited company, does it have any assets, how long has it been trading, can you get a guarantee of personal liability from the directors (and do they have any assets), if not a limited company (or LLP) do the individuals running the firm have assets you can claim on.

For limited companies with employees it is a legal requirement that they have insurance cover for those employees - this is usually rolled up into a combined employer/public liability policy.

Potentially, for this couple, it gets worse, not only have they lost their home, they could also have a contractual liability to the flat above (which has also been destroyed) and to the adjoining house (which has been damaged). The fact that those homes may have adequate insurance doesn't mean that the insurance company will not pursue repayment of the losses.

Always do thorough checks on any firms you employ to complete major works.

[Proppage]

"Also by relying on their contract policy any claims money will go straight to them, unless you jointly named insured on their policy and I am sure if they have burnt down your house, I am not sure you will want those builders returning to fix the problem!

The correct way of insuring the property during insurance is to take out a renovations/ project works insurance that cover the existing structure and contract works on a comprehensive basis on a single policy in your name and control for the length of the works. The contractor would still need his own liability insurance and worth checking a copy of this but this way it is not only the most comprehensive way of covering the works, it is usually the only way."

This can't be correct - as long as a builder is appropriately insured, you'd be claiming against their public liability insurance and as the claimant, any money due (and subsequently paid) would go to you, not the insured builder. Surely the whole point of public liability insurance is that an un-named party (i.e. "The Public") can claim against it in event of the insured's negligence? (one would assume if the house above a basement conversion collapses, there's been some fairly demonstrable negligence involved...?)

We're, hopefully, starting a basement soon and I will certainly be checking with my own insurers what I must do and will be verifying that our contractor is appropriately covered but the above statement doesn't sound right at all.

[jameslavers]

Propage,

Thanks for your reply. You are certainly correct in terms of a public liability claim - i.e. contractor sticking a steel through the neighbours property and there is clear negligence and therefore money paid out would be paid out to claimant, if successful.

A house collapse would be slightly different as there essentially would be several insurance parties involved, surveyors, architects, structural engineer's Professional Indemnity all fighting over this. In these cases negligence is not so clear and claims can take years to resolve, meanwhile the home owner is helpless. Definitely worth looking at Non Negligence Party wall insurance for any work with a structural nature going on.

The point I was trying to get across and perhaps didn't so well enough was on a contract all risks policy known as CAR. Some contractors have this, others don't. This is essentially covering the bricks and mortar of any works, like an extension or basement up until the works are complete, when you would increase your household policy to add in the extension/ basement works sum insured.

If something happened, perhaps near the end of the works where a considerable amount of money has been spent by then, any claim that affected the contract works - basement/ new kitchens etc by fire, flood, subsidence this would have to be claimed by the contractor on their CAR policy and unless in joint names, any claims money would go to them, not the home owner. It can lead to huge problems and unresolved issues for years. I am happy to forward on claims examples on this. As the works will be attached to the existing structure, any claim that affected both areas, if insured separately would have to be claimed under the existing structure (household) policy and CAR policy, which is where the problems start!

As mentioned a household policy will not cover the contract works and will either come of cover or reduce cover significantly when you tell them of work ongoing, which would probably breach any mortgage terms, if you have that. NB CAR policies do not cover the existing structure as some builders tell cliental, when they say we have the insurance covered!

The contractor as you point out will still need his own Public Liability cover for any claim caused by their negligence (tile falling on someone's head etc) but contract works policy and existing structure cover are best on a single renovations policy under your control or joint names, depending on the contract wording.

Hope that helps but happy to discuss privately if required.

[legalconsultant]

As a disputes resolution solicitor, specialising in construction and engineering, and running a small consultancy BTC, this resonates all too true, sadly.

The difficulty here is the typical set up of this type of domestic building project i.e. the "all in one" company which professes to project manage it all for the homeowner, and sells the advantages of the "all in one". The reality is that the homeowner is then asked to sign 2 contracts: 1 with the company, and 1 with a builder, often unknown to the homeowner at the time of signing.

Each carries different insurance policies, on different terms, which are not necessarily complementary (to the extent they have to/ choose to...also a potential problem).

PL and EL insurances are obligatory.
A services provider (e.g. architect, engineer, project manager) should but is not obliged to carry Professional Indemnity insurance. They will not carry Construction All Risks (CAR) insurance.
A builder will almost certainly not carry PI cover (unless he is also carrying out design). He should carry CAR cover, but is not obliged to - and it can be expensive so many do not.
The homeowner should have buildings and contents cover, but the insurer may well exclude from cover damage done by those third parties during the works in the expectation that they will carry the requisite cover, at an appropriate level.

Relying on PL insurance is not sufficient.

Consider taking out project insurance, a specific policy to cover for the project. It can be expensive though but at least you know you will have cover.
It is a minefield. It is very easy to void your cover too, so please everyone check what is covered, and what are the terms! Something I am often asked to do is to review the policies and ensure what needs to be covered is covered, and to identify the gaps, and see how they can be plugged. Peace of mind in the event of a problem is worth the small cost.

Last thing: always check the terms of the contract(s). I am often asked to advise on proposed contracts, only to find there are exclusions from liability, or a cap, limited responsibility, or a limited time in which to bring a claim etc. Moreover, and much worse, there may be gaps between the contracts which leave the homeowner exposed in the event of a problem with the works. If in doubt, take professional advice from a specialist construction lawyer: it doesn't take an experienced person long to review the documents and the investment is always worthwhile. Your adviser can then take up the issues with the proposed PM co/ builder on your behalf.

Happy to receive PMs if anyone has further questions or wishes to discuss anything.

[OLBC Group]

I totally agree with James.

CAR and PI are must haves. Don't use anyone who does not have both. It is easier for us as we don't like to subcontract.

Get the insurances checked by your broker and particularly if there is proper basement excavation insurance. This is NOT the same as underpinning/general build insurance. Basements need 3.5/4m excavation depth on cover. General build is limited to 1.2m - fine for Hobbit basements.

We insist on our clients taking out non-negligent cover as a part of a contract specific policy. Sometimes with James:)

We have never had a claim relating to structural works since we started digging basements in 2002. Get your broker to check out claims history. If there are a decent number of project per year(s) - check turnover - and none or low value claims then you can possibly deduce that they are careful people.

If they won't let your broker talk to their broker directly - walk away rapidly. That way nobody can claim lack of disclosure of claims history which can also invalidate policies.

[tooting_mummy]

Hello

I saw this story on the news and it gave me the fear!!
We are starting on a rear single story extension in a couple of weeks and my task for Monday is to sort out insurance so this is a useful find.

My first port of call will be our buildings insurance company to seek their advice as well as the builders to discuss their cover.
If they don't have CAR insurance can I take it out myself?
If so, what kind of sum would I be looking at for a 12 week £50-60k project?

Or would I be better getting some other type of project insurance?

Thanks a lot