Have you ever wondered what you're responsible for if your neighbour's property is damaged during the construction process? Property owners are liable to pay for negligence, but what about when an issue arises that's not caused by careless workmanship? There is an insurance policy called Non-negligence Insurance that protects against damage that occurs to neighbouring properties due to construction work.
What is Non-Negligence Insurance?
Non-negligence Insurance, also known as JCT 6.5.1 or Party Wall Insurance, protects property owners against damage to any property that is not the result of contractor negligence.
It's no surprise that owners and contractors have different priorities when it comes to making sure the works they're doing are as safe and secure as possible. Owners want to make sure their property is protected at all times, while contractors naturally want to ensure that they stay on budget, avoiding any unnecessary costs or delays. This disparity in interests can lead to a lot of disagreements over who should be responsible for damage caused by the construction process.
In general, a contractor's liability insurance will cover any damages they cause. The problem is that many of these policies don't cover damage to third parties caused by circumstances beyond your control. Non-negligence insurance may prove beneficial when negligence towards a contractor cannot be established.
How does Non-negligence Insurance work in JCT contracts?
Non-negligence Insurance, or 6.5.1 Insurance, now covers a variety of contracts used by the construction industry.
JCT (Joint Contract Tribunal) contracts specify the responsibilities and obligations of all parties. With an agreement in place, each party is clear about the tasks to be completed, who is responsible for them, timeframes, costs, and insurance responsibilities involved.
To avoid subrogation, insurance should be obtained in joint names, and the contractor should make sure that sub-contractors, where applicable, are named on the policy. JCT contracts typically include a mechanism for the employer to review the appropriateness of the insurance and, if necessary, take out the required coverage and recover the costs from the contractor as a debt.
Joint Names Policy: Most domestic building contracts require insurance in joint names to protect the property owner. The cover will typically include both the existing structure and the works, providing the homeowner with the most effective protection. The property owner benefits from a joint names contract because they have control over the insurance and will be informed if the cover is cancelled during the work.
A joint names policy is especially useful if there is a disagreement with the builder during the construction process, as the homeowner can transfer the joint names interest to a new contractor if necessary.
What does Non-negligence Insurance cover?
The risks covered are very precise and are listed in the JCT Contract as follows:
- Collapse
- Subsidence
- Heave
- Vibration
- Weakening or removal of support
- Lowering of groundwater
This insurance can either be obtained by the contractor working on your property or by you as the homeowner.
How do I purchase Non-negligence Insurance?
The cover is set up in the contractor and employer's joint names. The policy can be purchased separately or endorsed by your contractor's insurer onto their contractor's annual policy.
What isn’t covered by Non-negligence Insurance?
It's worth noting that the policy has a few key exclusions, including:
- Negligence-related loss or damage (otherwise insured by the Contractors’ Public Liability policy).
- Damage that is considered unavoidable as a result of the construction process (not an insurable risk).
- Loss or damage resulting from the design of the works (usually covered by a Professional Indemnity policy held by the contractor).
- Loss or damage that would otherwise be covered by the Employer's Buildings and/or Contract Works Insurance policies.