With the market under pressure from all angles at the moment there are plenty of projects running over their expected completion date. If you don’t remember to extend the contract works insurance then you risk not having cover if something happens after it expires.
In a nutshell, contract works insurance covers accidental damage or loss to the works being built.
We recently dealt with a claim where the homeowner was responsible for taking out contract works insurance (since it was an alteration to their existing house). The project was extended and delayed by 6 months, but the homeowner forgot to extend the insurance. Some damage occurred to a concrete pad that was laid as part of the project, but it wasn’t insured since the contract works policy had expired before the damage happened.
The contractor is potentially liable for the repair cost, since they did the damage. However, it could be argued that they should not have to pay, as it would have been covered by insurance if the homeowner had extended the policy (as they were contractually obliged to do).
Good practice:
- Set a reminder to ensure your client extends the insurance if a project is delayed
- Get evidence that they have done so (a copy of the certificate)
- Agree who is responsible for the excess if there is a claim
- Ensure your contract stipulates the penalty if the insurance is not correctly obtained. Eg. that the builder is not liable for any costs if they would have been covered by insurance that the homeowner has failed to obtain or maintain
If you’re thinking that the damage should be covered by the builder’s public liability insurance, this is complicated. Public liability only covers your liability for damage to someone else’s property. So, it would only be a public liability claim if the damaged concrete floor was owned by the homeowner, not the builder, at the time it was damaged. Read more about this in our article Public Liability Doesn’t Cover Damage or Loss to Your Own Goods.
In a Nutshell
Make sure your client extends the contract works insurance if the project is delayed!
The information presented in this article is general in nature and not intended to be financial advice for individual situations. You should speak to an expert about your specific circumstances and needs.