Q. What is the difference between market value and Buildings Declared Value?
A: "The building declared value needs to reflect the cost of rebuilding the property. Remember to include the cost of materials and labour and make an allowance to include debris removal, professional fees, fixtures & fittings, outbuildings, paths, walls, gates and fences etc etc.

The declared value is often very different from the market value which will depend on property demand in the local area, proximity of good schools etc and will include the cost of the land.

Up to date building valuations are the policy holder's responsibility to provide. This is very important. If it is too low, a claim payment may be reduced in proportion to the level of underinsurance. CKW recently published a Technical Bulletin on Building Reinstatement Valuations. We can offer preferential rates for a Valuation Healthcheck service from a leading specialist.

 Q. Why do I need to tell the Insurers when my property becomes vacant?

A: One of the basic principles of insurance is that of “Utmost Good Faith”. This means that you need to be completely honest with the insurers when you take out your policy and throughout the life of the policy. You must tell them anything which may influence them in their decision to take on the risk or in the premium and terms they wish to apply. Non disclosure or failure to keep them informed could result in your policy being voided and your claim not being paid.

I must advise you that a tenanted building is usually a much lower risk to insurers than an unoccupied building. The change in occupancy is viewed as a material change to the risk and you therefore have a duty to disclose this to insurers as soon as it happens. Insurance policies contain a General Condition called Alteration which gives them the right to void the policy if there is any alteration to the risk whereby the risk of damage, injury or legal liability is increased unless this alteration is notified to the insurers and is accepted in writing.

Please refer to CKW’s technical Bulletins on Theft and Arson – Unoccupied Buildings for more information about the problems associated with unoccupied buildings and the precautions which you should take.

 Q. I am considering purchasing solar panels and having them installed on the roof of my house. What should I do about insuring them?

A: You need to inform your household buildings insurer that you are having solar panels fitted. Most companies (but not all) will include solar panels as part of the building but you need to tell them because it is a material fact. You also need to increase your building sum insured so that it is adequate to cover the total rebuilding cost of your house including the cost of replacing the solar panels.

Please be aware that certain exclusions apply to all insurance policies. For example, gradually operating causes, frost damage and damage by vermin will all be excluded. In addition, a household policy would not cover breakdown or loss of income following damage/breakdown. This may be relevant if you receive a Feed in Tariff or are selling electricity back to the grid.

We can arrange specific insurance for solar panels which would include loss of income and breakdown. Please contact us if you require a quote and/or full details of the cover available.

One further point to note is that you should check that the installers have insurance to cover any damage they may cause at your property and to the solar panels while they are being fitted, commissioned and tested.

 Q. What cover does a standard buildings insurance policy provide for damage to drains?

A: A standard buildings insurance policy provides cover for a range of events (often called perils). The usual range of perils includes fire, explosion, lightning, storm, flood, malicious damage, impact and escape of water. Accidental Damage and Subsidence are available as additional optional covers. Damage to your drains would be covered provided the damage was caused by one of the perils or, if you have Accidental Damage cover, a sudden unforeseeable accident. What is not covered is wear and tear or gradual deterioration. These are viewed as maintenance issues and are not insurable under a standard buildings insurance policy.

However, if a leaking drain causes other damage e.g subsidence of the main structure, then this may be covered provided subsidence cover is included in your policy.

 Q. My property & business has been damaged by the recent riots. Am I covered and how do I claim?

A: If we tackle any damage to the actual fabric of the building first, most standard Property Owners policies are written on an All Risks basis which will include cover for Riot & Civil Commotion and standard Household Buildings policies will also include cover for Riot & Civil commotion. However, if the property has been untenanted or unoccupied for a period of time (other than normal holidays) cover may be restricted and you will need to contact your insurance advisor for further guidance.

With regard to Contents of your property, Business Contents e.g. stock, fixtures & fittings, will normally be covered against the risks of Riot & Civil Commotion and Theft under a standard Retail or Commercial Combined policy covering Material Damage. Standard Household Contents policies also include cover against the perils of Riot & Civil Commotion and Theft. However, a similar restriction in cover may apply if the property or the premises is unoccupied or any Contents are left in the open and you should seek further guidance from your insurance advisor.

Consequential Losses such as Loss of Rent or Loss of Income, may also be covered and this is something you will need to pursue with your insurance advisor.

If you need to make a claim, you must report the incident to your insurer and the Police at the earliest possible opportunity.

Under Riot Damages Act 1886, the local Police authority has a legal responsibility to reimburse persons who sustain damage to property as the result of Riot but any claim submitted to them must be made in writing within 14 days of the alleged incident. Consequently some insurers require claims specifically caused by Riot to be submitted, with supporting documentation, within 7 days of the alleged incident which, using their subrogated rights, allows them time to submit their claim for recovery of their outlay to the Police authority without being time barred. However, it may not be possible to report damage immediately if the area is unsafe or you are unable to gain access and most insurers will be sympathetic and will take this into consideration.

 Q. Please can you explain the insurance implications for properties which are held on a 'Feuhold' or 'Flying Freehold' basis?
 

A. 'Feuhold' is a term used in Scotland to define ownership of a property and the land it sits on. The closest equivalent elsewhere in the UK is 'Freehold' but where the property is a block of flats or a tenement the insurance position is different.

In England, Wales & Northern Ireland it is the Freeholder who is responsible for insurance, (often through a management company approved by the Freeholder). However, under Scottish Law the title deeds often define who is responsible for arranging the insurance of the building. It may state either: the individual flat leaseholder/owners have to arrange cover for their own flat for the full reinstatement value (they also have the right to obtain evidence that other flat owners have done the same); or the deeds may state the entire property must be insured collectively with other flat owners. The situation is further complicated by the common parts of the block which is again outlined in the Title Deed.

Where the Title Deeds make no mention of the insurance obligations, the Tenements (Scotland) Act which came into force in Scotland in 2004 steps in; in addition to making insurance compulsory on blocks of flats the Act extends the definition of a 'tenement' to include converted houses, tower blocks, purpose built blocks of flats & commercial premises as well as the traditional sandstone tenement block. The Act recommends collective insurance but allows for individual insurance subject to a set of rules to which all the tenants must agree. It goes without saying that the purchaser of a flat in Scotland should consult a Solicitor to ensure they fully understand their obligations.

A 'Flying Freehold' refers to a situation where a portion of a freehold property overhangs another freehold property – for instance when a bedroom is built over an alleyway or when a loft space is above a neighbouring property. The issue from an insurance point of view is the problem of rebuilding the property in the event of a claim for damage. This is because the owner of the 'Flying Freehold' property will have no control or rights in respect of the space under their element of the building. This makes rebuilding or reinstatement problematic and as such Buildings Insurers and advisers should always be made aware if there is a flying freehold element to a property in order that they can fully consider the potential risk they present.

Separate insurance is available for Flying Freehold Indemnity which can assist with the costs in the event of a loss.

 Q. I am a property owner of a building occupied by tenants. I am planning to have work done at the property to extend the building. What are the insurance implications of this?
 

A: There are three aspects you need to consider:

1) Liability insurance.

Assuming you are using a building contractor to carry out the work you need to ensure the builder is insured for Public and Employers Liability and that his policy contains an 'Indemnity to Principal' extension for your protection. You should ask to see a copy of their policy and ensure you are aware of any exclusions and conditions.

You will need to be aware of your insurance obligations under your contract with your building contractor. If you are using an architect he/she can advise you on this. In particular, you need to ensure the contractor has arranged insurance to protect your interests under clause 6.5.1 of the Joint Contracts Tribunal (JCT) Standard Form of Building Contract.
2) Contract Works Insurance

You should also ensure there is a policy in place to cover the Contract Works i.e. the new part of the building as it is constructed and any materials. Often this cover will be arranged by the builder - you need to ensure this policy also contains an 'Indemnity to Principal' extension for your protection. However, if your contract with the builder makes you responsible for insuring the contract works, we can arrange this cover. We would need full details of the works and the value and duration of the contract. Many of our Property Owners' policies include a Contract Works extension but you should always keep us informed of this type of work.

3) Cover for the Existing structure

Your insurers must be informed of any structural work at the premises. They will want to know whether the building will remain secure and weathertight for the duration of the work. Terms may apply depending on the details of the work. In particular scaffolding can pose a security risk since it will make windows on upper floors accessible. You should advise your tenants to notify their own insurers as their policy may be affected as well.

 Q: I am involved in organizing a harvest festival street party. What insurance cover do I need to arrange?
 

A: You will need to consider arranging cover for Public, Products and Employers Liability insurance.

If you are organizing this event as part of a Community group, you may already have some liability cover in place. You would need to notify your existing insurers about the event and provide them with full details of the activities taking place. Ask them to confirm that their policy can be extended to cover this event.

If you are hiring equipment such as a bouncy castle from a third party or employing a third party to carry out an activity or display e.g. fireworks/face painting, you will need to ensure that they have adequate insurance and that it provides ‘an indemnity to principal’ for your protection.

We can also offer event insurance for specific events through Hiscox. Their policy can offer cover for liabilities, cancellation and abandonment and property damage for items owned or hired in.

Let us know details of the event and we will be happy to provide you with a quote.

 Q: What do I need to consider when insuring a Listed Building?
 

A: The main issue with Listed Buildings is that, in the event of damage, the Local Authority or English Heritage will need to be consulted before repairs are carried out.

They may require that specialist materials and techniques are used in the rebuilding work. This will probably result in higher costs and a longer rebuild. Therefore you need to ensure your sum insured is adequate to cover this and you have put in place a lengthy maximum indemnity period in respect of business interruption, rent or cost of alternative accommodation.

Insurers will ask whether a building is listed and, if so, what Grade. Different insurers approach the insurance of listed buildings in different ways. Some require that the case is referred to them with full details of the construction. Some apply a premium loading and others insist on a professional valuation being undertaken at inception and 3 yearly thereafter.

 Q. I’m concerned that the increase in gold and precious metals could leave me underinsured despite having a valuation done 5 years ago.
 

Yes you are absolutely right; the increase in the value of gold could leave you underinsured in the event of a loss.

As many of us are aware the price of gold has risen by an unprecedented amount. Throughout 2010 gold gained in price by 26% and since 2006 the price of gold per ounce has risen from $500 (October 2006) to $1,600 (October 2011)*. It’s not only gold that has been affected. Silver and Platinum as a commodity, has increased by over 50% and 25% respectively over the past 12 months.

But what does this mean for you as our client?

In the event of a loss the insurer will only pay up to the sum insured specified on the policy schedule for specified items of jewellery or valuables insured on an agreed value basis. If your valuations are out of date, this could leave you with a significant shortfall.

Previously valuations of up to 5 years old would be considered sufficient but Insurers are now advising that valuations should not be any more than 3 years old.

What can you do? If you have already had a valuation that is more than 5 years old (even 3 years), then the valuation company can very easily review and update the values which will ensure that you are correctly insured.

It would also be worth reviewing your overall sum insured for items not specified on the schedule.

If you have never had a valuation and believe that you could be underinsured then Cadogan Keelan Westall can arrange a valuation for you. This would be with a reputable valuation company from their panel of valuation companies to undertake the task for you in the comfort of your own home. Some valuation companies are able to offer preferential rates if your household insurance is placed with specific High Net Worth Insurers through Cadogan Keelan Westall.

Bonfire night and the days running up to it are traditionally some of the busiest nights of the year for the emergency services. The anti-social use of fireworks and the resultant damage which can be caused to property is a serious concern, posing threats to all types of building, including commercial and industrial premises.

As far as this relates to the business community, the risk posed by fireworks, whether a result of anti-social behaviour, or merely an accident caused by burning debris, can be significantly reduced with the basis precautions:

• Ensure all areas of the premises are made secure, with all possible means of entry through which fireworks could be introduced to the property, being closed and locked.
• In areas where anti-social behaviour is perceived as high, consideration should be given to protecting letter boxes internally with metal containers, designed to contain fires from lighted materials.
• Take care that all yards and open areas surrounding the premises are cleared of accumulated rubbish and that waste bins are appropriately located and secured.
• Timber pallets, plastic crates and other combustible materials stored in the open should be kept to a minimum and located a suitable distance from the property.
• Flammable liquids and gases should be confined in the designated storage facilities.
• Cut back and remove vegetation surrounding the buildings.

Enjoy the festivities safely, I will be looking forward to the Catherine Wheels!

Trev

The most common claims in winter arise from burst pipes, roof snow collapse and water ingress. However there are many basic precautions that can be taken to minimise the risk of this happening.

Burst pipes

• Protect pipes and tanks with good quality lagging
• Repair any dripping taps and faulty ball valves
• For unoccupied buildings, leave the heating set at a low level and/or drain all equipment susceptible to freezing
• Inspect premises daily in periods of very cold weather
• Service your heating systems

To help minimise losses ensure that you know the layout and routes of the water, gas and electricity services. Know the location of the main and subsidairy stop-taps and research the details of local plumbing contractors to know who to call in an emergancy.

If you do suffer a water leak, isolate the water at the stop cock, turn on the cold taps to drain down the system quickly and turn off the central heating. This will help minimise any damage to the property.

Lastly, monitor the amount of snow on the roof and clear before it reaches an unsafe level. In addition, keep drains open and free of ice to minimise 'ice dams' being created and potentially causing water leakage.