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As the Construction sector continues to build up its return to work (which we recently wrote about), Brokers may now be wondering if their client projects are still in cessation. In the latest instalment of our series, sharing insights on some of the key insurance topics during these challenging times, we take a look at this very subject.
Are your client projects still in cessation? Don’t assume your client’s work has restarted now the Construction sector is heading back to work.
What happens to a client’s policy if works have stopped?
Renovation policies include a cessation of works clause which activate automatically. For all Allianz, HSB and RSA policies, this clause kicks in when work stops on site for up to 90 days. This means your clients continue with the level of cover they currently have for the period of time stated above.
Do Works have to be inspected during the cessation period?
In line with the Terms and Conditions of the policy, inspection of the property is required every 7 days. During the full lockdown, we advised that inspections should have continued whilst possible and practical to do so within the set Government guidelines. With full lockdown restrictions partially lifted, 7 day inspections may now be achievable but make sure your clients keep a record. This is hugely important, as in the event of a claim during cessation, being able to reasonably evidence an inspection regime could be useful.
When does the automatic cessation period cease?
As long as some form of work has taken place at the property, the cessation clause is no longer an issue, until such time that another period of inactivity has started again. In other words, if a site experienced a month without any work, but then one or two contractors were able to work at a site for a week, a new ‘up to 90 day’ cessation period would begin from the first day nobody was on site again.
Are my client policies at risk?
A policy becomes invalid if no work takes place for more than 90 days consecutively. If someone submits a new claim, and it transpired that work ceased 91 days before the incident occurs, that claim could be repudiated.
What do I need to know from my clients?
Below we share a number of key questions that you should ask to identify how this issue is affecting your clients right now.
- Has your client’s project been halted at any point?
- If so, when did it first stop?
- Have works restarted again, and/or is there a known return date in the near future?
- Has any form of work been carried out in the interim? If so, you’ll want to see a brief summary of those works (even if minor)
And in terms of site security questions:
- Has the property/site remained secure during this period?
- Has the policyholder, or someone on their behalf, been able to continue with inspections at least every 7 days?
When talking to your clients, we would advise that you investigate potential extension requests too, asking:
- We see your renovation insurance policy expires on XX/XX/XX, is your project likely to continue past this date?
- If yes, please let us know when, realistically, work might be completed by? (with appreciation that this may be difficult to be accurate on, given these current circumstances)
- Please also let us know if the current sum insured for the contract works is correct, or if the value of your project has increased.
Getting the answers to these questions first, means that we can move more quickly with the policy extension request when it comes in to us – making the process quicker and easier for you and your clients.
If you have questions on Cessation of Works more widely, take a look at our recently published FAQ article. We outline exactly what the cessation term means and highlight the steps that Brokers should take in advising their private clients. As always, our team of Underwriters are also available to talk to Brokers personally on questions or challenges faced in this current landscape.
* Please note that the guidance presented here was correct at the time of publication (as shown), but we would advise you to call us to confirm the very latest updates if this content is of relevance to you.