Renovators can be forgiven for failing to appreciate the importance of party wall insurance. We all tend to have a basic understanding of how liability to third parties works so it is often assumed that the contractor’s liability policy will deal with any party wall issues which arise. This is true to an extent, but for the contractor’s liability policy to operate, the third party must demonstrate that the contractor has been negligent in some way. Standard liability policies only operate in the presence of negligence.
The Party Wall Act imposes what is known as a ‘strict liability’ on those undertaking works. In plain English this means that so long as the third party can demonstrate that they have suffered structural damage, and that the damage stems from the works being undertaken by the renovator, then regardless of whether or not anyone has actually been negligent, the renovator is liable to reinstate the damage. If we follow this to its natural conclusion then we can see that the contractor’s liability policy is not going to cover off the full scope of the renovator’s liability. It will only cover damage which results from negligence and not damage which has occurred, but is nobody’s fault.
Specialists in the contract works insurance arena will be able to identify when a ‘non-negligent party wall liability’ exposure exists, and offer an insurance policy to cover off this exposure.
To further confuse matters, renovators may conclude that party wall insurance is not actually required in respect of structures which are not attached, or even proximate to third party property. This may not be the case for 2 reasons:
If a renovator is insuring the structure with a standard property insurer, then our advice where they are undertaking significant structural works would be that a party wall policy would have some value. The simple truth is that most, if not all standard property insurers will exclude damage to the existing structure caused by the contractor whether this was as a result of negligence or not. A party wall policy would therefore step in where areas of the structure not being worked on were damaged as a result of the works, but not as a result of the contractor’s negligence.
Specialist contract works packages tend to provide direct cover for accidental damage to the structure being worked on whether this is the result of negligence or not. If the renovator has taken out such a package, they will find that there is actually no need for party wall insurance in respect of the structure being worked on, but it must be understood that this accidental damage coverage does not extend to third party property. The contract works package will do the job of a party wall insurance policy as far as the renovator’s property is concerned, but it will do no such thing in respect of neighbouring property. To ensure neighbouring property is fully protected, the renovator must ensure that the contractor has adequate public liability insurance for negligent damage, and that there is a party wall policy in place for structural damage which is not the result of anyone’s negligence.
We’d just like to hammer home a point we’ve already made above. Renovators should be aware that there needn’t be a physical party wall for liability under the Party Wall Act to exist, and for party wall insurance to be a sensible option. If the works are occurring within a certain distance from neighbouring structures, even if they are detached, party wall notices may still need to be served, and the risk of structural damage to neighbouring property can still exist. Where there is risk of damage to third party structures stemming from the works, even if no liability exists under the Act, renovators can still benefit from the peace of mind such a policy provides.
Working with Renovation Underwriting, we can provide cover for building and refurbishment works for our existing clients or on new projects. Contact Cyrus Wakefield on 01306 740555 for details.