• 21 September 2022

In early September, the International Underwriting Association (IUA), the representative body for companies in London providing insurance and reinsurance, published an insurance clause developed alongside the Department for Levelling Up, Housing and Communities (DLUHC), specifically to provide professional indemnity (PI) cover for firms undertaking remediation works under the Building Safety Fund.

The Building Safety Fund is part of the wider government backed Building Safety Programme which aims to ensure that residents of high-rise buildings (over 18 metres) are safe in their homes, with works focusing on remediation of cladding.

The intention of this new insurance clause is to provide much needed PI insurance to companies and individuals carrying out this vital work. Previously PI insurers were hesitant to provide this, however the introduction of the new clause is geared towards changing that. According to the IUA, “the clause aims to help speed up the removal of unsafe cladding, encourage a greater safety culture within the construction industry and provide insurers with increased confidence in risk management processes employed by the construction sector”.

The key components of the new clause are: -

  1. Cover is limited to actual direct loss, costs, expenses or defence costs for rectification only, and only when incurred as a direct result of negligent act, negligent error or negligent omission in the insured’s professional services. All other losses, costs and expenses are excluded (e.g., indirect or consequential loss).
  2. In order for cover to apply, the insured must be able to clearly demonstrate that they have complied with a defined set of risk management provisions as set out in Clauses 2 (a) to 2 (f) of the clause.
  3. The sum insured will be limited to an aggregate amount (to be determined by the insurer) and will not be reinstated.

The clause is now readily available to PI insurers, and companies undertaking remediation work funded by the Building Safety Fund should contact their insurance broker immediately to discuss the application of this clause to their policy.

It is worth reminding readers that the remit of this new clause is for remediation works under the Building Safety Fund only, and not professional indemnity insurance for construction professionals more widely. The clause is designed to fit with the Building Safety Fund rules and cover is strictly confined to work undertaken by professionals undertaking work through the Fund.

To discuss any of the above in further detail, please do get in touch.

The IUA press release can be found here. Copies of the IUA Building Safety Fund Cladding and Fire Safety Limited Exclusion and Aggregation Clause are freely available to download from the association’s model clauses website (www.iuaclauses.co.uk).