Insuring Your Historic Building during Repairs and Alteration
As the fire at Windsor Castle showed, historic buildings are more at risk during building works than at any other time. In this article we examine insurance issues for repair, alteration or extension work.
Choosing a suitable insurance policy
Whether or not you're considering restoration or alteration work, make sure you set yourself up with watertight insurance from the outset. If you own an historic building, whether it's a stately home or an ancient cottage, a standard policy from a general insurance provider could fall well short of your expectations if you need to claim. And if your property is listed, it's protected by law - it's your responsibility to insure it properly.
It does pay to use a specialist insurance broker, who can provide advice about the choice of insurer, negotiate better premium rates and cover, and will usually arrange a risk management appraisal. They will also think ahead to issues which will come up if you need to repair, alter or extend the property:
- Building value: the difference between market value and reinstatement value is crucial for historic buildings. You need to determine how much it would cost to rebuild the entire building using like materials and methods of construction. A cursory note of the exterior construction is really not sufficient to calculate the rebuilding cost: from the outside, a building may appear to date from the eighteenth century, but the inner timber structure may be fifteenth century. Special features could be overlooked: fireplace mantles, plaster mouldings, carved timber panelling. Insurers like Chubb and Hiscox provide specialist appraisers.
- Cover for repairs: repair contracts of substantial historic buildings can be long and complicated, giving rise to many extra costs. The standard "cost per square-metre" tables used by non-specialist insurers and mortgage company surveyors to calculate rebuilding costs are simply not up to the job as far as historic buildings are concerned - especially if authentic materials are required. The Association of British Insurers advises that these tables are suitable only for houses of "average quality finish" and that if a pre-1920 house needs be reinstated to its original style, a professional valuation is required.
When you come to repair or alteration works
Having decided on the new wing to be added to the property, or renovation project to be undertaken, talk to your insurer about extending your cover for the works.
Some insurers do reserve the right the refuse cover for works over £75,000, or where a "JCT minor works 6.3b" (standard contract between builder and client) contract has not been signed. Others will happily re-insure if the paperwork is in place. For example, Chubb Insurance will ask you to complete a questionnaire providing details such as the name of the contractor, their public liability cover, their insurers and limit of indemnity, and a full description of works to be carried out. They will also need to know the contract value, contract period, details of security at the site, fire protection during the works, and whether a JCT Clause is applicable.
If your property will be uninhabited during the works, extra theft cover may need to be put in place. If your property is open to the public, your public liability cover will need reviewing, too.
Who does what?
The parties involved in the building works will usually be co-ordinated by an architect or surveyor, who will oversee the project. They will tender the work out to trusted building contractors and craftsmen. The choice of contractors is important - specialist materials and skills may be required to achieve a proper repair, and a poor job could affect the market value of the property. If the work is part of an insurance claim, most non-specialist insurers will insist you use a building contractor from their own panel, but insurers such as Chubb and Hiscox allow you to use the most appropriate craftsmen for your repair work.
Who is liable for what?
|Works in progress||Owner|
|Negligent damage||Contractor's public liability|
The architect/surveyor will probably use the "JCT Minor Works 6.3b" contract conditions to form the basis of the contract between you and the builder. This usually places the onus on you as the employer to insure against material damage to the project - hence the need to brief your insurance company fully. You need an insurer and broker who understand these contract conditions.
This onus on the property owner is the subject of some debate among insurers, and may change in the future so that the contractor is responsible for the works' insurance.
The main contractor has a responsibility to ensure no damage is caused to the property and must maintain adequate public liability insurance. The indemnity limit should reflect the maximum potential loss. For smaller homes an indemnity limit of £2 million will be adequate, for larger properties, the sum insured will need to be increased accordingly. Any sub-contractors who are employed must also carry the same indemnity limit and their insurance details verified before they start work.
Many claims during works arise from "hot works" (blow torches, welding etc) left smouldering to start a blaze. All reputable contractors should have a "hot works" permit which requires them to monitor an area worked on for at least an hour after the work has been completed. Check that the contractor or any sub-contractor does not have a heat exclusion in their liability policy, as this will affect your insurer's recovery rights.
If the building being worked on is close to other people's property, you should consider extending the contractor's liability insurance to cover non-negligent damage that may be caused during the works: the JCT 21 2 1 contract.
Repair and alteration works will make your property particularly susceptible to damage:
- Fire: Fire risks may be increased due to temporary wiring, exposed electrical wiring, electrical shorts brought about by pulling wiring, or damage to wiring caused by sloppy demolition or surround walls and ceilings. Flammable welding gases and paint removal torches are also dangerous.
- Water: damaged pipes and exposure to the elements add to the risks
- Mechanical systems: Mechanical systems need special attention (ventilation, heating, air conditioning and plumbing systems). Natural gas piping is a primary concern and often gets damaged during renovation works.
- Roof renovations: Roof renovations pose increased risks from both water and fire damage. Water damage claims are more common, but roof fires started by tar kettles, welding and other 'hot works' are not uncommon.
- Theft/vandalism: a works site may be exposed to theft of, for example, architectural items such as fireplaces.
- Public safety: if your property is open to the public, holes, walkways etc may be a hazard.
Minimising the risk
Good "risk management" is vital. A specialist insurance policy will make allowance for the costs of temporary support to prevent further collapse, and protection from the elements and theft. Here are a few ways to reduce your exposure:
- Housekeeping: renovation projects often generate a substantial amount of debris. This debris contributes significantly to the flammable load contained within a building, so keep it cleared and removed from the site regularly.
- Electricals: faulty electrical wiring and appliances cause most fires - ensure all wiring and older electrical appliances are certified safe by a qualified electrician.
- Fire protection: extend into the repair/extension site other fire protection measures such as fire blankets, fire extinguishers and smoke detectors linked to a monitoring station. For larger homes, a visit from the local fire officer should be arranged so that the brigade is familiar with the access to your property, the layout and the nearest water supply. A smoking ban should be mandatory on the site. If repairs are being undertaken on a large scale, it may be worth installing a temporary sprinkler system.
- Water: ensure the property is inspected for weather-proofing at the end of each works day. You could also install leak sensors on pipes, leak trays under pipes in high risk areas, and/or automatic isolator valves.
- Theft/vandalism: scaffolding may make the building more accessible to intruders, so security staffing may need to be considered.
Security measures should be carefully designed so as not to compromise or damage the historic fabric or integrity of the building.
The cost of insuring your repair works
You'll need to allow for an extra charge for the extended cover during the works, and once the works are completed (ie: your property's reinstatement value has increased with a brand new wing or a magnificent face-lift) the sum insured, and consequently the premium, will increase.
Work with specialists
Just as you'll need specialist craftsmen to restore a moulding, it really is worth choosing a specialist broker who can advise on cover and deal with claims settlements and disaster recovery quickly and easily. This will protect both the fabric and the value of your home - not to mention your sanity - when it comes to the crunch.
Proper planning today by owners and insurance companies will ensure the survival of historic buildings tomorrow.