It’s fair to say that when something goes wrong, how well your insurance responds can be the difference between a good result and a nightmare. Having represented many members when it comes to liability claims, we suggest a number of ways to ensure the process goes as smoothly as possible and the outcome, while perhaps not always the one you hoped for, is prompt and fair.
Liability claims are not black & white
Liability policies cover broadly defined risks such as “accidental damage”. It’s impossible to list all the scenarios where accidental damage could occur and certain, often broadly defined, situations are excluded also. This makes it hard to say whether a particular situation will be a claim without first investigating it. As a result there are grey areas, where something could be a claim depending on a person’s interpretation of the situation and the policy wording. This makes the assessment process critical.
A builder was installing insulation in a roof space when he accidentally put his foot through the ceiling. Is this a public liability claim? Answers at the end.
Understand what your policy covers in the first place
Probably the most common reason for dissatisfaction with the outcome of a liability claim is because the insured party has assumed the policy will cover something that it is not intended to. No-one expects you to be an expert in the wording of your insurance policy, but it is important that you do spend some time getting a handle on the cover it provides. Read the policy and speak to your insurer or broker when you take it out and again at renewal. That way, when something happens at least you’ll be in a better position to assess if it is prima facie (on the face of it) a valid claim or not.
An excavator preparing the site for a new house damages an underground cable, causing a power outage. Would this be covered by the contract works insurance?
Make sure you take due care
This is obvious, but a momentary assumption on site can backfire when it comes to a claim being accepted.
A builder putting up a heated towel rail puts a screw through a hidden water pipe. Is this accidental damage?
Do not admit liability
Even though it might be obvious to all involved that you were responsible for the damage, if you intend to make an insurance claim then the insurer (and ultimately the courts) decide who is responsible, you cannot make this call on their behalf. Do not promise that your insurer will sort it out, simply say that you will contact your insurance company.
Tell your insurance company ASAP
The quicker you put in a claim the faster it will be sorted out, and the less likely it is that other subsequent actions might jeopardise the claim. In some cases it may be faster for an owner to claim with their house insurer (or material damage insurer for commercial property), which may then seek to recover their costs from you (via your insurance). Either way, don’t delay making the call to your insurer.
Depending on the type of claim they will probably appoint an independent assessor to investigate the situation, determine liability and the likely cost and recommend a course of action.
Complete the claim form in full and with as much supporting evidence as you can
If the insurer has to come back to you for more detail this will inevitably result in delays. They will expect:
Claims assessors and loss adjustors are experts at sniffing out inconsistencies and if something doesn’t add up they’ll keep digging. The best approach is to answer their questions as fully as possible and allow them to make their decision based on all the facts.
A broker is on your side at claim time
If you have a broker you should expect them to help you prepare the claim and represent you to the insurer. This is where a good broker who is experienced in construction industry claims earns their money. If your claim falls into one of the grey areas of the policy then having an expert on board could be the difference between it being accepted or declined. If you deal directly with an insurer or through their agent, it will be up to you to argue the case. It’s not that insurers decline claims unfairly, in our experience this is not the case in the New Zealand insurance industry. However, when it comes to claims that fall into that grey area, and plenty of liability claims do, which way the decision falls could be down to the claims manager’s interpretation of both the events and the policy wording. That’s when you need someone with expertise, experience and relationship to argue the alternative point of view.
In a nutshell
Liability claims are often not straightforward, and liability policies open to interpretation. Don’t admit liability, get on to it straight away, cooperate with the assessor and supply information fully and frankly and ideally have someone with expertise on your side. This will increase your chances of a swift and successful outcome.
1. Maybe. It depends on your insurer’s wording and their interpretation of the incident. Was the ceiling the “property being worked on”? Was the house a new build and could therefore be considered “the builder’s product”? If the answer is yes to the above questions (in the insurer’s view) then, depending on the policy in place, a claim could be declined.
2. No. The underground services are “existing structures” and “third party property” and not part of the contract works. As such they will be outside of the cover under a contract works policy. They may however be covered by public liability insurance, under an “underground services” extension. In that case, to avoid jeopardising a potential claim, the policy may require that action to locate any existing cables and pipes be undertaken first.
3. That depends. Should a builder, who ought to know this was a possibility, have checked first? If he didn’t is it faulty workmanship? What you might consider to be an accident could be interpreted by a claims assessor as defective workmanship and subject to an exclusion or higher excess.