Firms face indemnity insurance exclusions on Grenfell-style projects

Source:, August 28, 2018
By: Emily Ashwell

Consultants which have worked on buildings with cladding similar to that used on Grenfell Tower are being refused professional indemnity insurance for some of their projects, New Civil Engineer can reveal.

Insurers are asking some to review 12 years worth of these projects and identify the risk posed by that cladding when renewing their professional indemnity insurance on buildings with cladding.
In some cases, insurers are refusing to cover these projects, leading to fears that these firms could be open to legal action if the client then decides the cladding is a risk.
Dame Judith Hackitt led a review into building regulations following the Grenfell Tower fire last year. She called for fundamental reform of the construction industry but stopped short of a recommendation to ban combustible cladding.
The cladding combination used on the Grenfell Tower has been blamed by some as a major cause of the rapid spread of the fire. In tests of cladding combinations after the Grenfell Tower fire last year, it was found 269 samples from buildings failed fire safety tests.
Howden insurance broker Matt Farman said: “The exclusions have come on in the last three to four months. Initially it was a bit of a watching brief to see what was happening, now it is getting more challenging to get cover without any form of exclusion or restrictions.
“Some insurers were reacting straight away, others had more of a watching brief, waiting for the Hackitt report to come out.”
In some cases, New Civil Engineer has been told, firms have been unable to get cover, even though these projects complied with building regulations at the time.
There is concern that this could increase a firm’s liability under ‘‘reasonable skill/care provision’’ terms. The defence could be made more difficult as there is no official guidance for what materials are allowed to be used and in which circumstances, and building regulations have changed over the years. They say asking another engineer if they would have used that material in that way could lead to subjective answers.
Multi-disciplinary consultant Bryden Wood has said it had to review 12 years of this type of project, and look at those which contain some type of aluminium composite material (ACM) panel, and assess the costs of removal and any linked costs, such as temporarily re-housing occupants while it is replaced, or cost to client in terms of decrease in value of property.
Bryden Wood civil and structural engineering director Kevin Masters said: “It is opening a very huge chasm, if you like, for clients and developers to raise a potential claim, because it is so broad (the definition of risk), there’s the real opportunity that someone could try to raise something.
“Even though it might not be grounded on much, it still takes a huge amount of effort and time to defend. We’re in quite a fortunate position in that our risk profile is very low, we have a very good relationship with our insurance company and our underwriters, but none the less, I fear for the practices that might not be in such a great position. If you have no professional indemnity, you have no company.”
Farman said there was a lot of inconsistency about insurance terms, as they depend on the past work of a practice. He said that alongside exclusions, some insurers are limiting indemnity on an aggregate basis.
“It will settle down once it becomes clearer what the government are going to pay for in terms of any remedial works needed, and what will be left that could result in potentially more claims. Until it becomes clearer, we’ll see this uncertainty remain,” he said.
The Association of British Insurers told New Civil Engineer that it was monitoring the situation.
It said that following Grenfell there has been a level of uncertainty about insuring the construction industry, particularly in the light of Hackitt’s report which said the current regulatory environment is not fit for purpose. It said there is a general view that there is a “lack of competence around all those involved in fire safety of a building.”
Combined with a history of major claims and complex supply chains, it said that the sector can pose “unattractive risks” to insurers.

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