Industry News

Many landlord insurance policies are unable to accommodate cover during buildings works.

Renovation Insurance for Buildings

April 2021

Many landlord insurance policies (known in the insurance industry as Property Owners policies) are unable to accommodate cover during buildings works or will restrict cover whilst works are in progress. Cover restrictions include reducing the perils which are covered to the acronym FLEA, standing for Fire, Lightning, Explosion/Earthquake or Aircraft perils only, meaning risks such as theft, malicious damage, escape of water (burst pipes), flood, subsidence are commonly all excluded.

This is likely to be the case if the property is unoccupied throughout the works (contractors on site does not qualify as occupied). Most Insurers will allow a small amount of non-structural decorative type work but when there is more extensive work needed, Insurers will often limit cover to FLEA and specifically exclude damage caused by a Contractor during renovation or refurbishment of a property. This leaves the property owner with a dangerous gap in cover.

Whilst a contractor should have cover for the contract works (for instance, an extension which is being built) and public liability insurance in respect of their legal liability for injury to third parties or damage to third party property arising from contractor negligence, there may be incidents where the cause of the damage is unclear. A good example is a contractor is carrying out electrical and heating installation at a property, and overnight a fire starts and causes extensive damage to the building. If the cause is undetermined it can be difficult to obtain indemnity from either policy as it is the insured who has the burden of proof. The insurer for the contractor will require evidence of negligence in order to pay a claim under the public liability section of cover, whilst the landlord insurer will seek to rely on the exclusion relating to damage caused by the contractor.

As a solution, Daines Kapp offer a facility which can provide cover for the buildings undergoing extensive renovation and refurbishment. Different levels of cover are available starting at basic cover for FLEA perils only up to all risks including accidental damage and subsidence. Critically, there are no contractor exclusions therefore so long as the peril is insured, the damage will be covered.

The policy can include the value of the contract works and public liability risks for the duration of the contract, covering both the contractor’s public liability as well as the landlords property owners liability. Cover may be extended to include contents, own construction machinery, hired in plant, site huts, tools, non-negligent liability, advanced loss of rent and terrorism.

This policy is design to bring peace of mind to property owners, ensuring their assets are suitably protected throughout the renovation process. Once works are complete, we can switch the cover back to a standard landlord insurance policy.