About coverage during property renovations

Hi Professor Manning,

I read all of your blogs, and now it’s finally my chance to write to you with a query! Here’s one that has confused the team at Stanton’s a little bit.
The context is that a client has a Landlord policy with [Insurer name withheld] for a property in Footscray.
They are in between tenants so they have decided to restump the building.  The Council have got wind of this and have advised that they need a permit for ‘asset protection’ and have sent our insured a form asking for the name of their insurance company and level of public liability cover.
Our insured has called me asking for this and I always ask who is requesting this info and why.
It seemed more likely to me that the Council would be asking for proof of public liability cover from the contractor carrying out the works, rather than from our insured, so I advised our client to get a certificate of currency from his contractor for use with the permit application.
That’s all fine – but in the meantime I sent the permit application form through to [Insurer name withheld] to review, just to double-check that I was correct.

They replied that a contract works policy needs to be in place for the restumping but then stated that the buildings would come off risk during the period of the works. I was surprised by this so I replied for clarification.
An underwriter called me and explained that whilst the contract works policy is in place, that the [Insurer name withheld] policy would not respond to ANY building claims. I threw a few scenarios at him (what if a tree falls on the roof and causes damage, what if a fire breaks out in the shed) and he was adamant that there is NO cover for ANY claims while the restumping works are being completed. This was news to me and I was also surprised that the UW told me that the contract works would be in place to cover these types of claims. I don’t deal with a lot of contract works policies but it seemed unlikely to me.

The [Insurer name withheld] underwriter is adamant that this is standard across the industry and that the insured parties are required to advise their insurer whenever they do any renovations at all. This is news to us, as we use the PDS for guidance on each policy and the requirement is normally over $20,000 (it’s $100,000 in [Insurer name withheld]’s case).

So, I guess my real question is – have our clients doing renovations been at risk all of these years by us not knowing that there is no cover for ANY claims during the contract works period?
I argued [Insurer name withheld]’s requirements to be notified of renovations and also the lack of definition of what renovations actually mean.

I hope this all makes sense to you and would love your guidance so that we may educate our broker team on this moving forward.
Thanks and keep up the interesting emails ?

Amy[surname and email provided]

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Amy,

I would ask you to check on PolicyComparison as to how each policy deals with renovations. Some allow $50,000. It varies across the market. 

Clearly, the risk is greater than a normal home during renovations. I cannot recall doing a claim as a result of a restumping.  

The issue for your clients is that business as usual claims such as storm, burst pipes, burglary, fires, etc., can still happen. 

With Contract Works, in this situation, will need to have an adequate cover for existing structures, often this is only insured for indemnity value. 

Then you need to check the hot works exclusion. On this subject, check if the old or new stumps are going to require any metal cutting, grinding or welding. This is the biggest risk, as long as they are not using cowboys. 

I would arrange the cover if you can with a specialist contract risks insurer. This is better than relying on the contractor’s cover. 

Hope this helps,   

Allan