Protection Works – What to Know About the Insurance Required 2

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Thursday, April 21st, 2016
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Protection works are works required to be done to protect a property from damage when works are done on an adjoining property (domestic or commercial).

The owner of the property where the works are to be done is required to take out or arrange insurance with respect to protection works. The insurance, if taken out as it should be, protects the adjoining property owner(s) themselves, as well as the property owner on whose land the work is being done, and the public. It should also give protection for a period of one year after the works have been completed.

The complying insurance has to be in place before the works commence. The tricky issue is that there is no such specific thing as a policy of ‘protection works insurance.’ This is a real surprise to many people when told of this. A ‘standard policy’ of insurance covering public liability and construction is insufficient, which is also somewhat unexpected to many.

Again to the surprise of some, the fact that the policy does not specifically name the adjoining owner or occupier (which is common) does not by itself mean the policy doesn’t comply with the law and provide the necessary cover. Also, the fact that the policy is taken out by the builder rather than the person desiring coverage, the adjoining owner or the developer (which is also common), does not mean coverage is not in place.

Somewhat circularly, to be a valid insurance policy and in compliance with the law, though, it must cover the adjoining owner. If it does not, and damage occurs as a result of the works, the owner must revert back to a remedy at law. They would have to request indemnification or reimbursement from the builder for the cost of the damage which occurs. The owner may need to sue for compensation, which obviously takes time and money.

To sum up, a call to an insurance broker requesting a policy of ‘protection works insurance’ will yield a negative response. As a matter of substance, however, relevant coverage can still be obtained in the circumstances by virtue of a variety of policy wordings provided the policy meets certain criteria.

As always, if you are looking for more information about this complex area, it is strongly advised that you seek professional advice.

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2
  1. Graham Morrow

    Paul

    Good article and interesting point. I also recommend that any builder ensures that a quality and extensive dilapidation survey occurs before any work is taken out, and possibly following completion also.

    Where an adjoining owner makes a subsequent claim, if a contractor fails to obtain a proper survey, it makes disproving the claimed adjoining owner damage much more difficult. Equally, if the survey is shoddy and lacking in detail, the adjoining owner will claim that the survey showed no damage so all damage present is the result of the contractor's work.

    Finally, some contractors are also not aware of their BCA and State legislation requirements for this type of work.

    Graham Morrow

  2. Chris Bovill

    Paul, Thank you for highlighting the difficulties with this type of insurance. I agree it is widely misunderstood. Unfortunately you are incorrect when you state that the Owner must take out or arrange the insurance. The Building Act only states that the Owner must ensure the insurance exists.This is completely different and such comments only lead to adjoining owners demanding a policy be arranged by the owner and they are also unwilling to accept a policy arranged by the builder which is the only means to satisfy the requirements of the Building Act. We are specialist insurance brokers and frequently arrange the necessary insurance. Another point of clarification for you is that the policy does not have to cover the adjoining owner. It must cover against damage to the adjoining property and liability arising from the protection works. Again this misunderstood point leads to much disputation with adjoining owners. I have requested the Building Commission and their replacement the Building Authority that the legislation be corrected but to no avail. We can only live in hope. But thanks again for highlighting this confusing situation.
    Chris Bovill