Building safety changes

By Rob Thacker, Pozitive Insurance
Property developers and construction specialists need to understand the implications of the new Building Safety Act (BSA) on their insurance protection and should be reviewing their risks.

Published in Suffolk Director Magazine Spring | Summer 2023

Insurance: Pozitive Insurance

The thread running through the new legislation introduced in 2022 is liability. The new Act has changed the way in which the Building Act (1984) and the Defective Premises Act (1972) view failures in building and construction duty of care, extending the protections available to leaseholders living in defective buildings.

Rather than contractor liability now being just six years for retrospective claims for defects, Section 135 of the BSA has extended the liability period to 30 years, for claims arising before 28 June 2022; anything after this date, there is a prospective 15-year period of limitation.

Damage caused by any breach of the Building Regulations, to any building in England and Wales, can now also lead to a claim going forward, although not retrospectively, with the period of indemnity being 15 years. Contractors and developers should not believe this regulatory tightening up only applies to cladding scenarios. The extended liability period actually covers all claims with legitimacy under the Defective Premises Act.

The changes could now lead to an increase in claims relating to property defects, particularly since a test case, brought by Martlet Homes Ltd against Mulalley & Co Ltd, found Mulalley liable for defective work carried out between 2005-8, when refurbishing 1960s concrete tower blocks in Gosport. The claimant was awarded £8m for the cost of the complete removal and replacement of the dangerous cladding. It also included costs relating to the ‘waking watch’ services, such as one of the two fire marshals required to keep residents in the buildings safe.

This sets a precedent for other similar actions.

Protecting leaseholders

In seeking to protect leaseholders from the costs of remedial works, the new legislation seems to be looking to insurers to pick up more of the tab for the cost, but this may not be possible. Since the Grenfell disaster, many policy wordings have had exclusions for cladding claims added.

As insurers consider the changes in legislation brought about by the BSA, there could be other developments in the insurance market.  Having already witnessed significant increases, Professional Indemnity (PI) premiums could rise still further. Insurers may impose more exclusions and be keener to see contractors and developers take up higher levels of self-insurance, shifting more risk exposure to the insured.

It is imperative that anyone involved in the property market talks to a broker, like us, who understands their risks and can help steer them towards the right protection. Similarly, whilst many contractors and developers may have audited potential latent claims exposures stretching back six years, they must now also review the picture over the last 30.

With a big increase in potential retrospective liability, plus the ruling on cladding liability, there has never been a greater need to work closely with a broker who can help protect your business against liability claims in an optimal way.

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Rob Thacker is CEO of Pozitive Insurance. If this topic has touched a nerve, get in touch to start the discussion about your risks today.

T: 07498 482289

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