ECIC highlights recent building catastrophes
The fashion for so-called ‘Iceberg’ basements continues to rise, with a ten-fold increase in application for basement developments between 2001 and 2014*. However, following the news that Westminster council has joined Kensington and Chelsea council in no longer granting permission for two-storey basements due to neighbour disruption**, and the story of one family in London whose house collapsed during building works***, ECIC, the specialist insurer for the construction sector is offering advice to property owners in order to raise awareness of the importance of checking the insurance covers for any contractor they employ to work on their home.
When the house in North London collapsed, the owners found that their loss was not covered by their home insurance and so turned to the construction firm responsible for the work to claim for damages. However, as the firm is insolvent, it is unlikely that any payment will be made, despite a High Court ruling that they were at fault. It proved a stark warning to property owners embarking on home improvement projects to do their homework and ensure that any contractor on site is competent to undertake the project, and that their insurance policies are supportive and related to the work they are undertaking.
ECIC offers the following suggestions for anyone speaking to a potential contractor about their insurance cover:
- RECOMMENDATION – Seek recommendations for contractors from other property owners who have had similar work done. Ask other contractors for their recommendations too. Check out their work.
- TRADE ASSOCIATION MEMBERSHIP – Always check if the contractor belongs to their industry’s leading trade association, as this should ensure a high level of technical competence as well as making sure that all industry standards are adhered to. Some trade associations can also help when a dispute with a contractor arises.
- YOUR INSURANCE – Speak to your insurance provider in the first instance to check that your own insurance is adequate to cover the work being undertaken. Always declare the extent of work being undertaken. If you are having structural alterations undertaken at the property such as a loft conversion or new extension, check that damage to your existing structure continues to be covered. Household insurance does not necessarily cover major building works. It is common practise for a householder to purchase materials directly from a supplier for example a new kitchen and then employ a contractor to fit / install the works. In this example check that your existing sums insured are adequate to cover the value of the new kitchen whilst it is being stored at your house awaiting to be installed. Also, ensure that your Insurance policy protects you against your legal liability if a contractor is accidentally injured and it is deemed your fault.
- CONTRACTORS INSURANCE – Always request to see sight of the Contractors Liability Insurance Schedule and Policy to ensure that they are adequately insured for the work that is being undertaken for you. You should be reviewing:
- BUSINESS DESCRIPTIONS – Make sure that the business description stated on any liability policy wording match the description of the trade themselves and the work they are doing. For example, if an electrician on site is also fitting a kitchen, and there is a fire or damage to the property, unless the policy covers them for kitchen installing any claim may be invalid and the homeowner could find themselves covering costs out of their own pocket. This is especially important if there are sub-contractors on site – does the main contactor have all the correct policies in place to cover all the different trades on site and is the amount of cover adequate for all eventualities?
- INSURANCE PERIOD – Check that the insurance period stated on the schedule covers the period that the work is being undertaken at your premises.
- PUBLIC LIABILITY – The main type of cover that any contractor should have in place is public liability insurance. This protects the contractor against their legal liability to Third Parties (you, the householder) against any damage and injury caused in the event of something going wrong. You should check that the limit of indemnity offered is adequate to cover any damage caused to your property. Commonly, limits of indemnity start from £2,000,000. All competent contractors should have this cover.
- PROFESSIONAL INDEMNITY OR PROFESSIONAL NEGLIGENCE – This cover protects the homeowner against a financial loss caused because of a negligent error in design or specification by the architect, designer or contractors. Check this is place for all the skills employed for the project. Commonly limits of indemnity start from £100,000.
- CONTRACTORS’ ALL RISKS INSURANCE – Usually the contractor is responsible for any materials they supply and install up to the point that you accept the work and the project is complete. If a loss occurs during this period, for example a fire when an extension is partially complete, the contractor would need to redo the work. In the case of major alterations, this could be costly to the contractor. Adequate cover would protect the contractor against this cost burden, without such cover the contractor may find themselves under financial strain.
- LIABILITY INSURANCE TERMS AND CONDITIONS – Insurers will impose terms and conditions onto a contractor’s liability policy to reflect their understanding of the contractor’s risk and to control the Insurer’s exposures. Common conditions could include a maximum height limit, maximum depth limit and strict rules when using the application of heat (blowtorch, welding equipment). In the case of catastrophic risks such as fire, any cover will only be valid if the precautions and conditions stipulated in the policy are adhered to. For example, a fire extinguisher may need to be in the immediate area and if it is not, then again, the costs of damage may not be covered by the policy. If such conditions exist speak to the contractor to check that their control measures comply with any policy terms and conditions. If a height or depth limit exists ensure that this is not restrictive in respect of any work being undertaken at the property.
- WARRANTIES – Warranty backed insurance can be very useful as it provides back-up in the case of a contractor going out of business. You should ask the contractor if they can provide this or homeowners can purchase this themselves.
- ADVICE – Homeowners can contact National Home Improvements Council (NHIC) members via the NHIC website www.nhic.org.uk. The NHIC is an independent body aimed at improving standards throughout the home improvement industry, working closely with government on policies that directly affect homeowners.
Phil Scarrett, Sales and Marketing Director for ECIC said “It is easy to get wrapped up in the excitement of a building project but we would always recommend that homeowners seek recommendations before selecting a contractor and check the finer detail of insurance covers. While there is an element of trust involved in any project, this is one area where homeowners, or any project manager appointed to oversee the job on their behalf, need proof of cover and proof of competency through membership of a relevant trade association. If anything, no matter how small or large, happens on site, without the correct cover in place it could fall to the homeowner to cover the costs and very soon that dream project can turn into a nightmare”.
**http://www.theguardian.com/society/2014/dec/02/kensington-chelsea-council-crackdown-bega-basements
**http://www.thetimes.co.uk/tto/business/industries/construction-property/article4510298.ece
***http://www.timesseries.co.uk/news/11854875.Builders___incompetence__led_to_house_collapse/?ref=mr
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ECIC media contacts
For further information please contact the ECIC Press Office at HSL: Alison Reeson/Laura Welsh. 0208 977 9132. ECIC@harrisonsadler.com