Construction Insurance - A Guide for Homeowners and Tradesmen

Construction insurance can be complicated. If you’re having some home improvements done or you are a builder yourself, it can sometimes be difficult to figure out how to make sure everyone involved is properly protected, or even what to do when something goes wrong.

Below we’ve listed some common questions about construction insurance, including the types of issues that are covered under these policies, how to claim and who is responsible*.

Tables of Contents

• What to do before starting building work
• What does each builder’s insurance policy cover?
• What to do if something goes wrong?
• What types of builder issues are covered by insurance?
• Documenting Claims

What to do before starting building work

Notify Your Home Insurance Company

It’s unlikely that your home insurer would need to get involved in any construction issue that arises, however some policies either exclude certain types of work or impose requirements for you to notify your insurer before work begins.

By discussing with your home insurer before work starts you can make sure that any of their requirements are met so as to avoid invalidating your home insurance cover. It is likely that your insurance cover will be amended (or a clause pointed out to you) to state that any damage caused by tradesmen is the responsibility of those tradesmen to put right. You may also be required to confirm that anyone working in your property has public liability cover (see below).

Be clear on what is being done

Before any work commences, make sure you have written up a statement detailing the work you would like to be undertaken for you, and that your tradesman has agreed to this in writing. Ideally you should also try to obtain an itemised estimate of costs and materials before work begins. Finally, confirm that any changes to the original plan or estimate need to be sent to you in writing and agreed by you.

These pre-commencement agreements and statements are extremely useful if anything should go wrong —you are entering into a business relationship with whoever is doing work for you, and being clear about what that entails can save you both time and money in the long run. Not to mention that in the event of an insurance claim it becomes much easier to understand who is responsible for what.

Check insurance documentation.

It is totally acceptable to request proof of insurance from anyone doing work from you. As a bare minimum public liability insurance is something that every tradesman should have, but professional indemnity is another important cover for anyone making design or technical decisions.

Contractors All Risk is an industry term for a package of construction insurance policies which usually contains public liability insurance, and will cover workmen for theft of their tools or damage to new buildings/extensions as they are being worked on. Insurance companies and insurance brokers will often produce ‘confirmation of cover’ letters which are very useful for summarising all policies and covers held by their customers—don’t be afraid to ask your contractor for one of these if the prospect of receiving reams of documentation is a bit daunting!

Making sure that anyone doing work for you has these policies in place can potentially save you a lot of time, money and stress, especially if anything does go wrong with the work. Even the best builders, architects, plumbers or electricians make mistakes sometimes and there is no real excuse for not having cover which protects both contractors and clients alike.

What does each builder’s insurance policy cover?

Public Liability

Public liability covers accidental injury or damage caused to third parties. In this case a builder’s public liability will cover against any damage caused during the course of their work, such as broken windows or damage to parked cars whilst moving materials. Note that a public liability policy will cover for damage or injury caused to any members of the public or their property, not just yours.

Product Liability

Product liability will cover for injury or damages caused by any products supplied by the insured person. Note that although a tradesman may supply a material or product, the eventual responsibility for defects with it may actually lie with the manufacturer, although the supplier (tradesman) will often take responsibility for replacing or repairing the faulty product.

Contract works

Contract works insurance will cover damage to buildings or extensions being constructed or worked on whilst they are incomplete. If an extension isn’t finished it is likely not listed on your home insurance yet. Similarly if a fire or storm damages the extension before it is completed, the contractors building the extension are not to blame. This is why contract works cover exists—to cover the losses incurred by both the homeowner and the tradesmen working on the project.

Contractors All Risk

This is a package of covers for tradesmen or builders. It includes all the covers so far discussed but will also include insurance for tools and machinery used by contractors. Typically, these covers are intended to protect contractors in the event that they suffer losses in the course of their work.

Professional Indemnity

Professional indemnity is intended to protect clients against any negligent design, advice or service provided by experts. If a tradesman advises you to take a certain course of action, or specifies materials or dimensions for the work that they do (e.g. designing an extension) and this turns out to be incorrect resulting in a loss to you, then you may be eligible to make a claim against their professional indemnity policy. Note that professional indemnity is more uncommon than the other policies listed except for architects, engineers, surveyors, project managers and other contractors offering more professional services. If you are hiring for a straightforward job such as basic plumbing or plastering, it’s unlikely this cover will ever be needed, but if you’re ever in doubt it is worth discussing with your tradesman and requesting they obtain quotes or insurer advice.

What to do if something goes wrong?

If work is not up to the expected standard.

If the work done is not to an acceptable standard you have protection under the consumer rights act, which states that tradesmen must use ‘reasonable care and skill’ when working. The first course of action should be to discuss solutions with the tradesman responsible and give them the opportunity to make things right. If you are unable to come to an agreement then you can ask for a full or partial refund. There are several further steps you can take to obtain a resolution, but claiming against an insurance policy is not one of them.

If work is delayed

If the work is not completed by the agreed end date, negotiation should still be your first step. Document any agreed extensions or discounts in writing. If you are unable to come to an agreement then the same dispute resolution and complaint steps apply as in the example above. Costs of this nature are more a case for small claims courts than insurance policies, although if you are ever in doubt you can usually obtain free consultations with solicitors who will advise you if your issue is claimable on insurance.

If your property is damaged

First you should try to come to an acceptable agreement with your contractor. If they damage something they may be willing to discount their fee to cover the cost of repair. If they are unwilling to negotiate or the cost of the damage is too great, the next steps would be either small claims court (for amounts under £10,000) or a claim through their insurance. If you obtained proof of insurance before the work started, those documents should include details such as policy number, insurer and possibly contact details. Whilst you may wish to obtain legal representation to pursue the claim on your behalf, you may also contact the contractor’s insurer directly.

Who is responsible for claiming?

The Tradesman

Your tradesman will be required to notify his insurer of any complaint or incident he believes may lead to a claim. In some cases as negotiations progress with his client (you), insurers may decide to get involved and escalate the notification to a claim.

You

You may have lost faith in your tradesman or find there is no way to proceed amicably. At this point you can follow the steps under ‘Documenting a claim’ in the section below. You can call, email, or even write to your tradesman’s insurance company to begin the claims process

Your solicitor

If the claim is for an injury or a large sum in property damages or other costs, you may prefer or even require the expert advice of a solicitor. Many will provide free consultations before taking on a claim, which can help you to understand the process going forwards and the next steps required of you. If you choose to proceed the solicitor will notify the tradesman and their insurance that they will be acting on your behalf. Often you will not be required to pay solicitor’s fees unless your claim is successful.

Documenting Claims

Documenting a property damage claim

Whatever route you take, you will need to write an account of what happened, what has been damaged or lost, how much it has cost you so far and any repair estimates you have obtained so far. Be sure to provide as much detail as possible and be prepared to provide evidence if asked (i.e. of quotes or bills). This should be your first step before arranging any repairs as if additional tradesmen are involved it will become difficult to assess the scope of any original damages. You can arrange for emergency repairs (say, for sudden escape of water) as they are needed, but be sure to retain contact details and invoices/receipts from any workmen you use.

Documenting a personal injury claim

For personal injuries you will still need to write a statement of events and retain as much evidence as possible. Since these claims tend to be larger than property damage they are typically handles by solicitors. For claims of this nature you may be required to undergo examinations or assessments with the aim of documenting the extent and impact of any injuries you have sustained.

*This article is intended as information only in order to help construction professionals and their clients understand how their insurance policies work. It is not intended to advise on any specific circumstance or claim and the examples given are for illustrative purposes only. If you believe that you may need to make a claim, or that a claim may be made against you, please seek advice from your insurance provider or a qualified solicitor. “