Introduction, definitions and inclusions
Some people refer to site insurance in a more generic way as self-build insurance which would be a wrong and confusing definition. Self-build insurance might be a better term for a branded wrap of site insurance and a structural warranty which some providers from time to time might put together. Site insurance is, however, something which the self-builder should be aware of and ensure they have from the moment they become a landowner in order to protect themselves and their asset. It need not be expensive and within the scheme of things it is not; its cost will be based upon your project size, the type of build, the project value, its duration and your postcode.
In its basic form a site insurance policy should include ‘contractors-all-risks’ to manage loss-of or damage-to the contract works. In addition, employer’s liability and public liability cover will almost automatically be included and there should be options for legal expenses, personal accident, contractual liability amongst many other potential options.
The key differences between new build and refurbishment projects
As a landowner, you may have acquired a greenfield site (or an existing house with the intention of knocking it down) a long time before consent is secured and that physical asset, just like any other piece of property, should have some insurance; and you should at the very least have public liability protection against any visitors who could injure themselves whilst on your land. This is known as (pre-project) ordinary buildings or agricultural insurance and is not the same as site insurance for building purposes. But, when the time comes to start your building programme your opening position will be quite clear; the site, regardless of any structures, will be valued as a site only with an extant beneficial consent. The value of the build, therefore, will be the developing asset covering both materials and project labour and all the physical processes involved of getting there.
By taking out an individual policy you won’t be reliant on any third party cover for making claims and all the stakeholders involved in procuring the build should be covered as your employees and/or suppliers when they or their products are on your site. Some folks might choose to employ a builder (main or principal contractor) with the expectation that the contractor’s annual insurance will cover the project; this could, however, be a risky strategy unless you have that policy reviewed by an insurance professional at the outset to ensure there are no gaps in cover. Typical gaps might exclude the kitchen if this is procured by you, or any other supply and fix items which are not channelled through the builder like alarm or data installation etc.
In addition, refurbishment projects are not so straight forward as there is always a house involved to start with and this will have value. Some folks retain their buildings insurance and notify their provider that they are embarking on a refurbishment, that they will be moving out and that a builder will be moving in. Some providers will work with this up to a point but may restrict basic building cover on a much more limited basis. If the contract works are then to be covered by a builder’s policy, matters become more complex as the contractor won’t have a financial interest in the existing structure. Some policies become endorsed with joint names but, by far the best, would be a refurbishment site insurance policy which seeks to include the value of the existing structure as well. Make sure your provider understands all of the nuances of your project so that there is absolute clarity of cover.
Insurance variables and things to remember
Always complete the application form accurately, leave nothing out and be clear and truthful. It may sound basic but this is where some policies do become invalid through incorrect initial data, wilful or otherwise.
Calculate your insurance reinstatement value carefully. It’s not just the value of the main build contract as you may have other contractors/suppliers to add in, as well as your own time. As the build develops on site the aggregate value-add will lead to a reinstatement value which will also need items like demolition, clearance, professional costs, external works, temporary mobilisation etc. Brokers often state that ‘under-insurance’ is a common mistake; furthermore, some insurers might limit an otherwise successful claim by the same pro-rata amount if an overall under insured value become obvious.
When calculating the policy term it’s always best to add 3-4 months as most people are ambitious on their project timetables. Whilst more insurance can be bought at the end (not necessarily extended) this will be a more expensive option compared to having a few extra months at the end, perhaps unused. Some insurers will let you convert unexpired cover into the first period of buildings insurance for the finished house.
Be rigorous and diligent with Party Wall matters adopting the full formal process as laid down by statute. You’ll want to opt for contractual liability cover and demonstrate proper documentation and then disputes with neighbours and extended liability for their property can potentially be covered.
Employers liability is there to protect you for all trades who your employ and public liability is there for visiting members of the public. Friends and family can sometimes fall between the two and whilst you might have some ‘free work or mates rates’ from some friends and family, their status needs to be understood. Some insurers will ensure they are always categorised as employees regardless of the paperwork between you so that their work and time on site is properly covered.
You’ll have options to consider for the policy excess and replacement levels for small tools and plant. Be very clear about hired-in plant; as soon as it gets to your site your policy will need to cover it (and its activity) unless you have ensured that the hirer is providing the insurance, which they do not normally do. Whoever signs for the plant’s arrival on site is technically taking responsibility for that piece of equipment until you have off-hired it and told the hirer to collect it. It’s the same principle here for a small scaffold tower or a large mobile crane.
If you need to make a claim then you should not be barred from any subsequent claims but, the small print is likely to limit the insurer to a maximum value; i.e. each claim will reduce the sum insured.
Site obligations and typical claims activitySite Insurance
Whilst the policy wording might not be prescriptive about site activities and levels for security, gates, containers etc., you must remember three things:
- First, you are expected to comply with health and safety in all your site management and material logistics. CDM 2015 obligates all sites to be compliant with no relaxations for self-build as there used to be. This means minimum levels of security are to be expected and a common-sense approach to material storage and movement.
- Second, you owe a duty of care to your insurer to behave responsibly. You would not leave valuable joinery items out on a verge, you would not leave power/hand tools lying around the site and you would try and prevent vehicle access when the site is closed. Failure to act responsibly may invalidate your cover.
- Third, in the event of a break-in, your role is to mitigate loss as quickly and efficiently as possible. Contact the police, get a crime report number, secure the site, protect exposed materials, and generally divert resources such that the site and it operations can be restarted as quickly as possible. Photographic evidence will allow you to demonstrate your duty of care to the subsequent loss adjuster’s visit and/or the insurer direct.
Grey, and deeply frustrating, areas
So, who is responsible when one of your delivery lorries drives right over your neighbour’s verge and knocks down their gate post? You may have an implied responsibility here but repairs are down to the driver or whoever owns the lorry. However, if that lorry takes wet sticky mud onto the road, which subsequently causes an accident, you will be responsible. This is because under health and safety it is your mud and your duty to prevent it from being distributed outside of your site.
Defective work is not covered. For example, damage caused to the kitchen worktop if it is cut badly is just poor workmanship, but dropping the sink accidently on top of the worktop and scratching its surface would be an accident and potentially a recoverable claim.
Negligent work is also not covered. For example, if the builder leaves out a DPC in the external brickwork then this would not be covered by you site insurance but may be recoverable through your structural warranty, and usually at the builder’s expense if discovered in the first two years after completion.
Most brokers will have key FAQ’s about their policies and you should take time to read and understand your obligations and any restrictions in cover.
Legal Expenses
Opting for legal expenses is well worthwhile but it usually means you must employ all your trades and/or contractors with standard forms of contract. If you’re keen on this option, and it would be one that I would always select, then establish from your insurer what constitutes a standard form of contract. And does this extend to suppliers as well?
The chances are that it just means a printed form of contract with some basic terms and conditions rather than an exchange of letters between you and the contractors. A lot of folks will hire a single tradesman based upon their emailed quote and your emailed acceptance. Whilst this might be a fair summary of the agreement between you, it would be a shame if this invalidated your legal expenses cover.
Simple homeowner contracts are available from the Joint Contracts Tribunal (JCT) and also the Federation of Mater Builders (FMB) as two good options.
Written and published in December 2016
