Discussing insurance is essential
builder to arrange the construction insurance to cover any damage to the actual works in progress under contract and public liability insurance to cover property loss or personal injury suffered by a third party.
The owner usually commits to arrange insurance for the existing property and contents.
If the contract is silent on which party is responsible for insuring the existing property, then it will continue to be the property owner’s responsibility as it was prior to the contract being entered into.
It seems relatively simple; however, there are critical issues that need to be addressed to avoid confusion, disputes and uninsured losses.
First, it’s common for both builders and owners to assume that the builder’s public liability policy will cover the owners’ existing property if it is damaged during the project.
But the builders’ public liability policy responds to injury or damage to third-party property when the builder is legally liable for the damage — usually for negligence.
Simply because the builder is performing works on the site does not automatically mean the builder is responsible for all occurrences of damage that may occur to the existing property.
Think of the situation where storm water enters a property during an extension to the existing building causing damage to the existing property and contents.
What if the water entered through a different part of the building, the opposite end of the property to the extension works?
What if the builder has taken all reasonable care to protect the property ensuring generous roof coverage by tarpaulins, correct ties, adequate overlapping, tarpaulins in excellent condition, ample weights used and appropriate consideration given to the foreseeable weather?
What if the builder is not legally liable for the damage?
How would a court of law view this?
The answers to these questions are uncertain and rely on an interpretation of law.
You can be sure that if the builder’s public liability insurer believes their client is not liable they will decline the claim and defend any claim the owner brings against the builder.
Second, many general home and contents policies will contain a clause that excludes all cover if alterations or additions are performed on the home over a certain value.
This value may be $15,000, it may be $30,000, or it may be $0.
Nevertheless, it is critical that you as the owner check the policy wording or contact your insurer to ensure the cover you have in place will respond if alterations or additions are being undertaken.