Does a Construction All Risk Policy cover damage to surrounding property?
Yes, damage to surrounding property is covered by a construction all risk policy, provided it’s included as an add-on to the Contract Works cover. This means an extra premium would be charged to get the specified surrounding property covered.
Surrounding property is any property located on, or adjacent to, the construction site, which is held in custody or control by the Contractor. It’s important to note that cover for damage to surrounding property would not be applied to construction, plant, equipment and erection machinery.
How does cover for damage to surrounding property work?
When properties such as houses, malls, offices etc. undergo renovation or repairs only the alterations are covered under the Contract Works, not the existing structure. This means the existing structure should continue to be insured under the existing Buildings insurance policy because the Contract Works would cover the newly renovated or extended portion of the building.
A common misconception amongst homeowners, architects, engineers and project managers is that the existing property insurance will automatically provide cover whilst an extension is being built, but this is not necessarily the case.
If the existing buildings Insurer is unable or unwilling to cover the existing structure, then the Surrounding Property add-on should be activated.
THE LEGAL STUFF
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