I was interested to read Rudi Klein’s recent article about the benefits of single project insurance to the construction industry (26 November, page 51).
Being involved in the insurance industry, I am, unsurprisingly, a supporter of this approach. In my view, the construction industry is far too inward-looking. Mr Klein alludes to decennial insurance in his article and again this is widely used on the Continent. In France it is a legal requirement.
However, the construction industry in the UK seems to view this protection as beneficial but not necessary, preferring to think that owners and occupiers would prefer to rely on warranties. Reliance on such warranties for owners, occupiers and even their funders is complete folly. There are many issues, but principally warranties are reliant on:
- the party providing the warranty continuing to trade for the full term
- the ability to prove negligence, which in itself is a huge burden
- the ability to fund litigation and perhaps temporary repairs
- being able to withstand any losses resulting from an inability to use the building
- the warrantor maintaining sufficient assets or insurance for the full period.
Decennial or latent defect insurance has the ability to eradicate many of these risks and Latent Gold, the scheme in partnership with local authority building control, reduces costs to affordable levels. However, although we have witnessed an increase in appetite for this type of protection, particularly after some recent high-profile failures, the industry continues to avoid its long-term responsibilities.
The insurance industry is not blameless in this situation but I do believe that, with products such as Latent Gold available, the construction industry needs to embrace such covers and provide the owners and occupiers with some certainty beyond the completion of their building.
Rather than being Belgian, let’s be French!
Mark Jackson, Bland Bankart