Low take-up of Latent Defects Insurance

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Why is latent defects insurance not common in the UK?

If the proposition is straightforward, then why is Latent Defects Insurance cover not common in the UK? The answer to this question is quite complex and one which has been exercising the minds of numerous people associated with the construction industry.

Latent defects insurance for new buildsHistorically, Contract Works Insurance (or Contractors All Risks) has provided an ‘all party’ cover in respect of new works, during the construction phase and the maintenance period, of a new building.

After handover, an owner would have to prove that any damage manifesting itself was the result of negligence on the part of one or more parties to the construction contract.

What are the options?

The options would then be to:

Either way this is likely to be a protracted process with no guarantee of success but this, believe it or not, is what most developers rely on.

They choose to ignore the facts that:

Construction building defects are rare

The good news is that severe post construction building defects are rare so that the likelihood of suffering is comparatively remote but, unlike a serious fire, which is also a very remote occurrence, building defects are not visible and rarely receive much publicity.

From time to time items appear in newspapers illustrating defects in buildings, such as the design defects in Great Ormond Street Children’s Hospital extension; the cladding failure on BP’s building in London; the nickel sulphide inclusions causing shattering of overhead glass in the Eurostar terminal at Waterloo Station. These are all high profile examples and get headlines. But for each high profile example they are dozens which do not make the headlines.

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