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Detailed Practice Notes written by our Professional Support Lawyers, guiding you through the key issues in each topic.
Buildings insurance - overviewRefurbishment and fit out projects
The issue of buildings insurance on a construction project generally only arises in the context of a refurbishment project. On a new build scheme, there is no existing building to insure, whereas on a refurbishment project or a project which is being carried out within an existing building, the building owner is likely to have an existing insurance policy in place.
On all construction projects certain insurances have to be taken out - these include a contractor's all risks policy, a public liability policy and professional indemnity policies. There are others which may be taken out depending on circumstances including non-negligent insurance. The question to consider is how these policies inter-relate to the existing buildings insurance policy, if at all.
Depending on the nature and extent of the construction works being carried out it is possible to extend the buildings insurance policy to cover the works. In this situation, the parties need to consider whether the policy satisfies the requirements of the relevant construction contract insurance provisions. For example the JCT contracts require the employer to take out insurance which covers the works and the existing buildings under option C. The insurance has to be in the joint names of the employer and the contractor. If the policy does not comply, the employer can choose to either take out a separate policy for the works or to amend the building contract.
The other issue to consider when working in an existing building is the overlap between the contractor's all risks policy and the contractor's public liability policy. The JCT option C states that the insurance only covers damage to the existing buildings caused by specified perils. Any other damage must be covered by the contractor's public liability policy.
Who is covered?
Whichever insurance arrangement is decided upon the parties should ensure that they establish at an early stage who is covered and for what. For example - does the extended cover under the buildings insurance policy, which covers the contract works, also cover the subcontractors?
Landlord and tenant
The insurance situation is further complicated when it is not the landlord or the building owner who is carrying out the works, but a tenant. In this situation it may not be the tenant who takes out the buildings insurance policy. In fact, in multi-let buildings, whilst the tenant will be covered, it is the landlord or head leaseholder who will take out the policy.
The tenant will need to establish whether the policy covers the works to be carried out and which parties are covered. Most landlord policies will not cover tenants contractors and so the tenant will be need to consider other arrangements if it is to satisfy the requirements for joint insurance under a building contract. In addition, because the tenant only has an insurable interest in its own demise and not the whole building it will not be able to get cover for the rest of the existing building. A tenant will therefore need to consider what all risks policy it takes out to cover the works and whether it complies with the building contract. It also needs to consider, in conjunction with the landlord and the contractor, whether a buildings insurance policy or the contractor's public liability policy covers the rest of the building.
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