This type of insurance is not widely understood and is referred to in a number of different ways. It is also known as Party Wall Insurance or Non-Negligence with 21.2.1 and 6.5.1 referencing the clause numbers in a JCT contract wording.

This type of insurance is designed to meet a renovator’s obligations and liabilities under the Party Wall Act – the party wall agreements will detail the insurance requirements or if funds must be retained in an ESCROW account.

The Party Wall Act imposes strict liability on behalf of the Renovator which means that there is no requirement on the neighbour to prove negligence by the Renovator as part of the work.

Generally, if you allege that a contractor has caused damage to your property (for example a nail through a pipe) the contractor has to be found liable and been negligent in order for a claim to be successful. As the name implies, non-negligence insurance doesn’t require a contractor to be negligent and therefore if a neighbouring building collapses but there is no negligence on behalf of the contractor, his public liability insurance won’t respond so the neighbour would be exposed. If there is a non-negligence policy in force, Insurers will then review the claim.

There are a number of key exclusions to this type of cover, namely:

A non-negligence policy will also only respond to the following perils:

An Escrow Account is a legal arrangement in which a third party holds the renovator’s money in the event of damage by the above perils to the neighbouring properties. Once the works are complete, these funds will then be returned to the renovator. However, these funds will be significantly in excess of a non-negligence policy premium.

A non-negligence policy can be extended to include damage to the areas of the renovator’s own property not being worked on. If the damage is sustained to the works, then a Renovator’s Contract Works policy (if it has been purchased) will respond to the damage as it doesn’t require negligence on behalf of the Contractor to respond.

In order to arrange this cover, it is not a requirement that the works are notifiable under the Party Wall Act or whether there are any party walls.

This insurance is most commonly arranged for properties which are undergoing a basement dig, underpinning or where it is only the façade of the building is being retained as the risk to the neighbouring properties is significant (but should be considered for any structural works where a neighbouring property is close by especially if a party wall agreement is in place).

This is a difficult class of business to write with underwriting being technical and complex, so Insurers need to be provided with thorough and clear information. Claims are expensive and complex.

The insurance is generally arranged by the Renovator (referred to as the Employer in contracts) with the contractor named so it essential that the Contractor undertaking the works has sufficient experience in the work being undertaken.

Please contact me if you have any queries on this complex subject matter.

Clara Boyce ACII Chartered Insurance Broker
01424 612423

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