Last edited 02 Feb 2018

Non-negligent liability insurance

Construction is an inherently dangerous process with many hazards, in particular when working close to existing buildings or other structures. In such situations, there is the potential for that property to suffer damage, even if care is exercised.

As a result of the potential for these sorts of losses to occur on construction projects, Joint Contracts Tribunal (JCT) contract forms provide for non-negligent liability insurance to be taken out, and other forms of contract may have similar provisions, either as part of the standard form or as an amendment.

Such provisions require that the contractor takes out a policy that protects the developer in respect of any expense, liability, loss, claim or proceedings incurred as a result of damage to property from the works being undertaken due to; collapse, subsidence, heave, vibration, weakening or removal of support and lowering of ground water. It is also possible to include cover from the hazards of flood, explosion, backing up of drains and bodily injury to third parties caused by an insured peril.

The cover may be in respect of existing buildings being worked upon and/or property on adjoining land. The policy is issued in the joint names of the employer and contractor.

This sort of cover is not always be required as the kind of activities which give rise to such losses may not be present on all projects. Consultants will usually be able to recommend whether or not the cover is required.

There are a variety of activities that could give rise to the potential hazards covered by the insurance, including:

Piling and foundation excavations
Underpining.
De-watering of the ground
Demolition close to an existing property.
Shoring of walls
Works that may affect the load-bearing capacity of a structure.
Works on listed buildings or buildings in a poor condition.

Typical exclusions from non-negligent cover might include:

Damage caused by negligence, omission or by default of the contractor or subcontractor.
Damage which is due to error or omissions during the design process.
Damage which could reasonably have been foreseen as inevitable.
Penalties incurred under contract and damages for breach of contract.

The Royal Institute for Chartered Surveyors (RICS) have produced a guidance note which provides further information on non-negligent liability insurance, including details of Gold v Patman & Fotheringham (1958), the landmark case in this situation.