UK & Europe
In our last article covering the Fire Safety Act 2021 (the Act) and the Building Safety Bill (the Bill) on 10 June 2021, we discussed what the Act and the Bill were, their scope and what their implications were for insurers. To recap, the Act proposes to introduce substantial reforms to fire safety in buildings, providing clearer guidance on who is responsible for fire safety in buildings and for updating the fire risk assessment.
Running in tandem with the Act is the Bill, which includes a new and stricter regulatory regime, regulated by a new Building Safety Regulator, applying specifically to high risk buildings (those which are 18 metres or higher or higher than six storeys above ground level). Key points are:
The creation of a new accountable person responsible for building safety on occupation and;
The introduction of new gateways to ensure that regulatory requirements are checked in detail at each of the planning, design and construction stages.
Much interest and debate has been garnered since the introduction of the above. In this article we will discuss:
It is of course arguable that all buildings of any height should be subject to stringent safety measures. However, as above, the Bill has focussed the new measures on those buildings over a specific height or storey count, with the government estimating that there are some 12,500 high rise residential buildings falling into this category as at April 2020.
The Association of British Insurers (ABI) is one such body which has been pushing the government for an extension to this proposal. James Dalton, Director General of the ABI, has been quoted as saying that "fire does not respect arbitrary height limits", so there is an argument that the Bill’s measures should be extended to lower risk and lower rise buildings. After all, if the aim of these measures is to make homes safer, why should it not?
On the other hand, the government’s published position is that those in buildings falling outside of the proposals remain protected by factors such as the height threshold for requiring sprinklers in new residential buildings having been reduced from 30m to 11m. Such comments may be of little comfort to those living in buildings on the cusp of the more stringent measures, particularly those who are unable to evacuate themselves quickly in the event of a fire. That said, the government has stated that the regime could be amended in the future.
A new measure brought about by the Bill has been to increase the limitation period for claims under the DPA from six years to 15 years, which will apply retrospectively once the legislation is in force, albeit it will not apply to claims which have already been settled or finally determined.
This extension will no doubt be welcomed by homeowners and their building insurers as this provides added protection where defects sometimes can take time to manifest. It also opens up causes of action against contractors, developers and designers etc. which would otherwise have been statute barred. However, for construction professionals and others involved in 'taking on work for or in connection with the provision of a dwelling' the extension will mean increased liability and greater exposure.
For the insurance market, these proposed changes will mean immediate greater exposure to liability and claims for insurers of construction professionals and private individuals who may face a liability claim under the Act. However, whether there will be an increase in claims, or even successful claims, remains to be seen, particularly given the difficulties in proving claims under the DPA such as whether the defects render the property 'unfit for habitation'. Furthermore, evidential hurdles will arise in terms of obtaining documents to pursue or defend a claim in respect of works completed nearly 15 years ago. Also, in the absence of insurance, the space of 15 years could mean that some companies enter some form of liquidation or insolvency in that period thus extinguishing the ability to recover any damages. The Bill also provides that the courts still dismiss a claim where it breaches a defendant's human rights.
Insurers can perhaps expect at least an increase in the threat of claims under the DPA against construction professionals and in some cases private individuals, which will have an upwards effect on premiums and possibly availability of cover in what is already a hardened market. Overall, however, the risk would appear to be greater for commercial organisations, with homeowners and insurers having the benefit of an extended recovery option which is likely to be the better news, subject of course to being able to overcome the hurdles of a claim under the DPA.