Party Wall Insurance: Do I Need It and How Do I Get It?

What is Party Wall Insurance?

Party wall insurance, sometimes referred to as ‘Non-Negligent Insurance’, ’21.2.1 Insurance or ‘6.5.1 Insurance’ is a type of liability insurance. It responds directly to a liability placed on renovators and property developers by the Party Wall Act 1996 (the Act).

The Act places what’s known as a strict liability on renovators and property developers for certain heads of structural damage sustained by neighbouring property owners as a result of the works being undertaken. The term ‘strict liability’ means that it is not necessary for the affected property owner to prove any negligence. It is sufficient that the property has sustained damage, and that this damage can be demonstrated to have arisen as a result of the works being undertaken. The relevant heads of insured damage are:

• Collapse
• Subsidence
• Heave
• Vibration
• Weakening or removal of support
• Lowering of groundwater

Do I need Non-Negligent Insurance?

We are often asked why this cover is needed, given that the contractor holds public liability insurance. The answer is that the contractor’s liability insurers will only consider damage which is as the result of the contractor’s negligence. Relying on this policy alone leaves the renovator/developer exposed to incidents of third-party property damage. This applies when damage cannot be pinned on a specific cause, or where the relevant parties can demonstrate that there has been no negligence.

Party wall insurance is usually bought by either the renovator/developer or their contractor and will always be issued in joint names. It should be clarified that it is not actually necessary for a liability under the Act to exist (because, for example, the at risk property is more than 3 metres away from the works, or because excavations will not go below the foundations of the neighbouring property) for the policy to operate/ ‘No liability under The Act’ is not an exclusion under this type of insurance. Similarly, just because there is no liability under The Act, it does not follow that this insurance cover would not be sensible. In all cases, the renovator/developer should consider the risk that the works pose to neighbouring structures and base their decision on whether or not to purchase this cover, and at what limit of indemnity, on that. 

There are a series of exclusions, but chief amongst them are:

• Damage which is as the result of negligence
• Damage which could be reasonably foreseen to be inevitable.

How do I get insurance?

In terms of getting this cover in place, you’ll likely need a specialist to guide you. The underwriting of this party wall insurance is a very technical operation, and it relies on quality information. We would advise the following:

• Have the proposal form completed by someone on the professional team. This should be someone with intimate knowledge of the structural aspects of the development (e.g. the lead contractor and/or the structural engineer).
• Answer questions on the proposal form directly. Responses such as ‘refer to drawings’ are not going to be acceptable. The purpose of the form is to summarise complex technical information, not simply to refer to it.
• Be ready to provide supporting documentation such as plans and drawings, geotechnical reports and method statements
• Whatever you do, do not commence structural works until the policy is in place. Insurers are unlikely to grant retroactive cover in all but extremely limited circumstances.

Working with Renovation Underwriting, we can provide cover for building and renovation works for our existing clients or on new projects. Contact Cyrus Wakefield on 01306 740 555 to speak about a quote for party wall insurance. You can message us via our contact form if you prefer.