Site in Administration: Insurance and Warrantieson
Where do you stand from an insurance and warranty perspective if your site goes into administration?
Contractor insolvency is a big concern in the construction sector. Insolvency was at a relatively high rate when compared to other industries a few years ago. However, in recent times we have seen contractors feeling the knock-on effects of significantly large principal contractors and developers going into administration. When you add the stricter Government legislation and constantly increasing costs (including insurance) to the mix, it is no wonder we have seen more and more contractors struggling.
Contractors becoming insolvent has had a huge impact on developers and their sites. This causes significant delays in completion and potentially leaves you uninsured and, in some cases, unable to replace the insurances with adequate cover.
Where contracts are almost complete, there is sometimes an option for a property insurer to take on the risk where they know the premises is secure and watertight. However, often the contractor will become insolvent part way through a build, leaving the developer exposed for weeks, if not longer. A new contractor coming on site is likely to only cover the works that they have completed themselves, meaning the previous works completed by the contractor before they went insolvent remain uninsured.
The solution, where available, is to find out where the contractor placed their contractors all risk insurance and see if that insurer will underwrite a new policy between yourself as the developer/employer and the new contractor. The insurer that has already taken on the risk so far (and potentially surveyed the site) is much more likely to offer the full terms without the gaps mentioned above.
To prevent this happening in the first place, you can make it your contractual responsibility as developer to take out the insurance; either as a project policy or as an annual policy, which provides the option to change the contractor noted on the policy, should a replacement contractor be required.
When it comes to structural warranties, each case would be reviewed on its own merit, with the continuation of the policy entirely at the underwriters’ discretion. The existing policy would need to be re-assessed and dependent upon the individual circumstances, alternative cover may be required.
Building Control will also need to be considered, looking at factors such as, who provided Building Control, the stage of the Building Control when the site(s) stopped and how this is to be managed going forward.
Our structural warranty experts can assist with alternative or replacement cover. One of our partner consultants, Consult 44, have a wealth of experience (stretching back to 2008) when it comes to arranging and advising on warranties for sites in administration.
Working alongside Consult 44, we can help you if you are struggling with a site which is, or has been, in administration. Whether this consists of obtaining a status update for the areas mentioned so that an action plan can be determined, advice on new insurance options, technical advice to give a clear understanding of the current site condition, undertaking condition surveys or any other matter, we will work with you to make sure your proposition for a replacement cover is strong enough to be accepted by an alternative insurer.
For more details on how we can help, please get in touch today:
T: 0161 830 7556