GRENFELL TOWER FIRE – IMPACT ON PI INSURANCE MARKET

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The shocking story of the Grenfell Tower fire starts with the £10m refurbishment that took place between 2014-16. Despite the amount of money invested in the building, residents’ safety concerns were ignored and sprinklers were not installed. Instead, cladding was added to make the building look more attractive and improve insulation. Solid foam boards coated in aluminium rainproof sheets were spaced 30mm apart across the 24-storey building, which housed 120 flats and at least 500 residents.

The tragic blaze is thought to have caused at least 80 deaths and led to 158 families being evacuated and in need of rehousing. A further 650 households were told to leave their homes immediately after fire inspectors deemed five tower blocks in a housing estate in north London as ‘at risk’. And the consequences of the fire are set to affect further families across the country, as the Government has since revealed that samples from various other buildings have failed fire safety checks.

The repercussions of Grenfell will play out for several years, but there will undoubtedly be immediate effects for those involved in cladding or façade work. Generally, cladding contractors pay a higher professional indemnity premium than others in the building trade due to the increased risks associated with their jobs. The expense involved in removing, redesigning and replacing broken or damaged cladding is further complicated with the new fire risk that has been identified.

Despite the vast UK insurance market, the volume of professional indemnity insurers willing to accept the risks of cladding contractors has always been reduced, and this has dramatically decreased post-Grenfell. This could impact any trades involved in the design, construction or refurbishment of buildings over 18 metres, not just those directly involved like cladding specialists or the main building contractor. Insurance may also become more challenging and expensive for architects, sub-contractors, project managers and health and safety consultants.

Although insurers are still formulating their approach post-Grenfell, we’re seeing professional indemnity insurers asking detailed questions to those involved in the construction sector. Examples of the type of questions being asked are:

1. Do you have any involvement in cladding or façade work?

This includes the construction and refurbishment of high-rise tower blocks, both commercial and residential.

2. Can you confirm the materials used are either fire resistant or non-combustible and that they conform to the manufacturer’s recommended use of the product and comply to building regulations in place at the time of build/refurbishment?

First published by the British Standards Institution (BSI) in 2002, the BS 8414 test methods were developed by the Building Research Establishment (BRE). They evaluate whether a cladding system subject to fire breaking out of an opening (such as a window) in an external wall, will result in excessive fire spread up the outside of the building and the potential for fire to re-enter at a higher level.

The use of new and innovative products for cladding buildings has given rise to concerns about fire performance, as these systems are often less well understood than more traditional construction materials. The Grenfell Tower fire has illustrated the importance of adequately testing external wall systems on a realistic scale.

3. Can you confirm that you have not been involved in the design, use or installation of aluminium composite panels?

Aluminium Composite Material (ACM) panels are a commonly used product in the refurbishment industry.

These additional and detailed questions will undoubtedly affect the purchasing of insurance. Contractors, architects and other building trades should perform a review of their past work to identify where they’ve used or recommended any problematic materials. Similarly, when policies are due for renewal, discussions should start as early as possible so time doesn’t run-out and insurers questions are prepared for in advance.

This is a very complex and unfolding situation and during this period of uncertainty it is essential to maintain a good relationship with the current insurer and fully respond to any questions they pose. The current insurer will be in the best position to offer renewal terms, possibly the only option as new insurers decline to take on other insurers’ risks.  Failing that, Miles Smith has access to specialist insurers in the London market who may consider offering terms on a case-by-case basis, including providing assistance on excess layers where the current insurer has reduced their policy limit at renewal and a top-up is required.

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