Party Wall Insurance (also referred to as non-negligent, 21.2.1 or 6.5.1 insurance – it’s all the same thing) is a type of liability cover which is designed to meet a renovator’s obligations and liabilities under the Party Wall Act.
The Act imposes a ‘strict liability’ on renovators for certain heads of structural damage to neighbouring property stemming from the works. Because the liability is strict, it is not necessary for the neighbour to demonstrate negligence. Because of this, it is not possible to rely exclusively on a contractor’s liability insurance to cover damage to neighbouring property.
In a loss situation, the relevant insurers will establish first and foremost, whether negligence has been present, and this will dictate which policy deals with the claim. Where negligence is present, then the contractor’s liability insurers will be on the hook. Where there is no demonstrable negligence, the party wall insurer will take the claim forward. There are certain key exclusions:
- Damage which is the result of negligence
- Damage which can be reasonably foreseen to be inevitable
- Damage resulting from defective design/materials
In addition to protecting third party property from structural damage, the cover extends to include damage to areas of the policyholder’s own property not being worked on.
This is a risky class of business to write. We see a disproportionately high volume of claims under this head of cover. In addition, the underwriting is technical and complex. With this in mind, it is essential that we are provided with thorough risk information. If this guidance is not followed, then the quotation process is likely to be long and frustrating for all involved, and the terms are likely to be less favourable.
This cover is available whether or not the works in question are notifiable under the Party Wall Act, and whether or not there are actual party walls. It is sufficient that there are structures in the vicinity of the works which are at risk.