New insurance scheme guidelines for private-sector building inspectors were published for consultation today by construction minister, Nick Raynsford.
Commenting on the proposals, Mr. Raynsford said: “I want to see fair competition between public- and private-sector building-control bodies across all sectors of the construction industry. As a step towards fuller competition we need to put in place guidelines for insurance schemes applying to all categories of building, not only to commercial buildings.
“The proposed new insurance guidelines aim to provide proper protection for anyone who has to sue an approved inspector for negligence, whilst maintaining parity of treatment between approved inspectors and local authorities.
“Competition between local authority building-control departments and private-sector approved inspectors promotes better and more efficient building-control services. This is good for the construction industry and good for building users.”
The consultation period ends on 10 October 1999.
A number of insurance schemes have been approved under guidelines first issued in 1996. These 1996 guidelines, and schemes approved under them, apply to building-control work on commercial buildings, not houses and blocks of flats. The 1996 guidelines require cover against personal injury claims, with stated minimum limits on insurers’ liability. They require automatic run-off cover to respond to personal injury claims made up to 10 years after the inspector ceases to practice.
In the absence of insurance guidelines extending to houses and flats, only one approved inspector, NHBC Building Control Services Ltd, can currently compete with local authority building-control departments in the housing sector. BCS is insured by its parent, the NHBC, under an ad hoc scheme approved in 1985.
The proposed new insurance guidelines reiterate the terms of the 1996 guidelines. In addition, the new guidelines would require approved inspectors, while practicing, to maintain professional indemnity cover against all negligence claims, ie claims for economic loss as well as personal injury claims.
To provide additional protection for residential owner-occupiers, the guidelines would require automatic 10-year run-off cover for economic-loss claims from such owner-occupiers. However, to maintain parity of treatment between approved inspectors and local authorities, this new element of automatic run-off cover would apply only where claims were not based on the law of contract.
Most owner-occupiers of new homes buy from a developer. It is the developer who engages the approved inspector, and the buyer has no contract with the approved inspector. Where there is no basis for a claim under the law of contract, claims rely on the law of tort. Local authority building-control departments do not undertake their work under contract so that all negligence claims against them are under the law of tort.
A leading case, Murphy v Brentwood District Council, means that, in practice, claimants under the law of tort may be unable to recover damages for economic loss from a building-control body, whether that body is in the public or private sector. However, if an owner-occupier is successful in seeking an award against a former approved inspector under the law of tort, the automatic run-off cover would respond.
The proposed new element of automatic run-off cover would not respond in the case of an economic-loss claim against a former approved inspector under the law of contract. However, by analogy with the position for architects, the department envisages that approved inspectors should be strongly encouraged to take out normal run-off cover on ceasing to practice. Normal run-off cover would extend to contractual claims.
PLS News 13/7/99
