The increase in domestic building works during the pandemic shows no sign of easing as homeowners look to extend properties – perhaps to create home offices or more space for socialising with family. Equally, commercial property owners are also making significant changes to their properties as they redefine space for a post covid world.
This has led to an increased interest for JCT 21.2.1 insurance – but what is this little known insurance and who should buy it?
This insurance protection arose from a court case – Gold v Patman & Fotheringham Ltd 1958. It involved establishing who was at fault for damage caused during construction works. Whilst there are a range of insurance policies that offer protection to individuals and organisations, during construction projects it can sometimes become impossible to prove that anyone was at fault.
Subsequently, things can get complicated, and so a specific type of insurance that may cater for this very eventuality was developed called JCT 21.2.1 insurance. The name ‘JCT 21.2.1’ refers to the clause in JCT contracts that requires the contractor to take out this insurance for the benefit of the property/land owner (referred to as the “employer” in JCT contracts). It’s sometimes called ‘JCT 6.5.1’ as the numbering of the clause has changed.
It doesn’t have the most marketable name, but it can be a crucial cover for property owners, developers and contractors, potentially filling the coverage gap should damage occur to a third party’s property and there hasn’t been any negligence on the part of the contractor.
Examples when cover might be help
One of the scenarios where cover might help is when works are taking place at a neighbouring property and the vibrations cause cracks to walls or ceilings of the adjacent property that were not there before work started. These cracks may be easy to repair, but what if the cracks cause the wall to collapse?
If the neighbour’s builder was negligent, their own Public Liability insurance should cover the cost, however, problems soon start to arise when it’s not possible to prove that the neighbour’s contractor was negligent, and the neighbour has a liability that is not insured.
Who takes out the cover?
The contractor takes out the cover as part of their contract – but in the event of a claim, the cover is designed to protect the property/land owner, not the contractor.
The architect or legal advisors involved in the project will usually recommend that this cover is in place.
How does the cover work?
In the unexpected case above, the wall could most likely be quickly restored – but what if the wall has been weakened so much that it leads to a collapse? The resulting claim could easily add up to hundreds of thousands of pounds. JCT 21.2.1 insurance covers claims that can become very expensive and where the contractor hasn’t been negligent.
JCT 21.2.1 insurance covers claims damage which may have been caused by any of the following:
- Collapse
- Subsidence
- Heave
- Vibration
- Weakening or removal of support
- Lowering of ground water
The policy follows the language of the JCT conditions and protects the owner of a property against a claim made by a third party (usually a neighbour) who has suffered damage to their property as a result of the contractor’s work.
How do you buy cover?
The market for this insurance is quite bespoke, and it is important that as a contractor you have the terms of cover very carefully explained to you to ensure you understand the conditions of cover and how it will protect you and the property/landowner.
It’s important insurance brokers explain the reason for the cover and what is and is not included to their policyholder beforehand as this will ensure there is no misunderstanding in the event of a claim – especially as these incidents can be quite sensitive, due to it generally being a neighbour who claims. This is particularly important where the property/land owner is a private individual who may not have had previous experience of 21.2.1 Insurance
As specialists in construction insurance brokers, Blythin & Brown has access to reputable insurers who can offer this insurance. If you would like us to review your construction insurance programme and help you gain a better understanding of your risks and where you may have gaps in insurance protection please get in touch.