Cladding and external wall - retrospective claims wave

Spoke 5 of the Apex Insurance Brokers Building Safety Act 2022 hub. The Grenfell Tower fire of 14 June 2017 took seventy-two lives. The legal and insurance response continues to ripple through every part of the construction supply chain. This article tracks the financial waterfall and explains where PI sits in it.

Plain English summary

After Grenfell, central government and Parliament built a layered financial framework to fund and recover the cost of remediating dangerous external wall systems on residential buildings. The framework is intentionally designed to push the cost back up the supply chain — to original developers and, through them, to the original consultants and constructors.

The central architecture has four layers:

Leaseholder protections. Schedule 8 of the BSA 2022 prevents qualifying leaseholders from being required to pay for cladding remediation on buildings over 11 metres, and caps the amount they can be required to pay for non-cladding remediation. Where the leaseholder is not paying, someone else must.
Remediation Orders and Remediation Contribution Orders. Sections 123 and 124 BSA 2022 give the First-tier Tribunal power to compel landlords to carry out remediation works and to require landlords, developers and "associates" to contribute towards the cost of remediation.
Government funding schemes. The Building Safety Fund (for ACM and non-ACM cladding on residential buildings over 18 metres) and the Cladding Safety Scheme (for buildings 11–18 metres) fund remediation up front but reserve subrogation and recovery rights against the original supply chain.
Developer pledges and contracts. The 2022 Building Safety Pledge committed major developers to fund the remediation of buildings they had developed or constructed. The Self-Remediation Contract — entered into between government and individual developers — formalised the arrangements. Developers signing the Pledge have committed billions of pounds; the recovery against the supply chain is the natural next step.

The net result for PI buyers is a sustained wave of retrospective claims. Consultants and contractors who worked on residential buildings over 11 metres at any time in the last 30 years are within reachable striking distance of a remediation-related claim. PI insurers, who price tail risk, have responded with sub-limits, exclusions and tighter underwriting.

The legal position

The leaseholder protections — Schedule 8 BSA 2022

Schedule 8 to the BSA 2022 came into force on 28 June 2022. It applies to leases of dwellings in "relevant buildings" — broadly, residential buildings of at least 11 metres or at least five storeys containing at least two dwellings — where the lease was granted before 14 February 2022 (the qualifying date) and where the leaseholder meets the qualifying criteria.

For qualifying leaseholders:

Paragraph 8: no service charge can be made for the costs of "relevant measures" relating to "relevant defects" of cladding, on or after 28 June 2022.
Paragraph 9: caps on permitted service charge for non-cladding remediation, by value of the lease.
Paragraph 11: no service charge at all if the landlord is the developer or is associated with the developer.

The detail is technical. The point is that the cost of cladding remediation cannot land on qualifying leaseholders — so it must land somewhere else.

Remediation Orders — section 123 BSA 2022

Under section 123, an interested person may apply to the First-tier Tribunal (Property Chamber) for an order requiring a "relevant landlord" to remedy a "relevant defect". The Tribunal can specify the scope and timescale of the works. Failure to comply is enforceable in the usual way.

Remediation Contribution Orders — section 124 BSA 2022

Under section 124, the Tribunal can require a person specified in the order to make payments to a specified person for the purpose of meeting costs incurred or to be incurred in remedying relevant defects. The persons who can be ordered to contribute include:

A landlord of the building (whether or not the landlord on the application date).
The developer of the building.
A person "associated" with either of the above, as defined in section 121 BSA 2022.

The "associate" definition is broad. Common-control corporate groups are caught; persons with substantial control under a partnership / limited partnership are caught; and the Tribunal has shown a willingness to look through corporate structures where appropriate.

The early Tribunal jurisprudence on section 124 — including the well-known Triathlon Homes application — has shown the Tribunal willing to make substantial RCOs where the statutory thresholds are met.

Recovery up the supply chain

The RCO mechanism transfers cost to the original developer and its associated group. The developer (or its insurer) then has every commercial incentive to seek recovery from the original consultants and contractors. The principal legal hooks for that recovery are:

Section 1 DPA 1972 — the 30-year retrospective limitation window (see Spoke 1).
Civil Liability (Contribution) Act 1978 — contribution between persons liable in respect of the same damage, two years from settlement or judgment.
Contractual claims — under the original appointment, building contract or collateral warranty, subject to the original limitation periods.
Tortious negligence — subject to Murphy v Brentwood for pure economic loss but possibly available for physical damage.

Martlet Homes v Mulalley

Martlet Homes Ltd v Mulalley & Co Ltd [2022] EWHC 1813 (TCC) is one of the most important post-Grenfell construction judgments. The case concerned a 2005–2008 EWI cladding refurbishment of five tower blocks in Gosport. After Grenfell, the freeholder commissioned investigations, identified defects in the cladding system, and carried out remediation. Martlet then sued the original contractor.

The TCC found:

The original installation breached the contract because of fire-stopping defects and inadequate installation of fire-break cavity barriers.
The Grenfell fire and the resulting changed regulatory and market environment did not break the chain of causation.
The cost of replacing the system (not merely repairing it) was recoverable, because the system as installed was not safe and could not be made safe by patching.
Substantial damages were awarded against the original contractor.

Martlet is important because it shows the route from original defective installation to substantial damages, in the post-Grenfell world, without needing any of the BSA 2022 statutory machinery. The case has been widely cited as a template for further claims against original constructors.

Naylor v Roamquest

Naylor & Others v Roamquest Ltd (above and see Spoke 1) is the other foundational case. It confirmed that cladding-related defects can render a dwelling "unfit for habitation" within the meaning of section 1 DPA 1972, providing the substantive route to liability that section 135 unlocks the limitation door for.

The Building Safety Fund and Cladding Safety Scheme

The Building Safety Fund ("BSF") and the Cladding Safety Scheme ("CSS") are central-government funding schemes for residential remediation. The BSF launched in 2020 for residential buildings over 18 metres; the CSS followed in 2023 for buildings 11–18 metres. The deeds of grant contain conditions that reserve subrogation / recovery rights and oblige the recipient to pursue available recoveries from the supply chain.

The Building Safety Pledge and Self-Remediation Contract

In April 2022 the government published the Building Safety Pledge — a commitment by signing developers to remediate buildings they had developed or constructed since 1992. The Self-Remediation Contract, between government and individual signatories, gave the Pledge contractual force. Signatories have committed multi-billion-pound sums in aggregate. The recovery process from the supply chain is now mature and is the principal driver of contemporary PI claims activity in the construction professional sector.

PAS 9980 and EWS1

PAS 9980:2022 sets out the methodology for fire risk appraisal of external walls. The EWS1 form, developed by the Royal Institution of Chartered Surveyors with industry partners, became the de facto market document used by lenders to determine whether to lend on a flat in a building with an external wall system. EWS1 is not a statutory document; it has had a difficult history (multiple revisions, market disputes, professional indemnity exposure for signatories); but it remains an important practical tool. PI on EWS1 sign-off is severely restricted in the market — see Spoke 6.

The PI implications

A sustained, multi-year claims wave

The cladding and external-wall claims wave is not a one-off; it is a sustained, multi-year recovery process. Industry estimates put the total UK remediation cost at £15bn–£25bn over the next decade. Even a small percentage of that pushed into supply-chain recovery generates billions of pounds of claims activity against construction PI policies. Insurers are pricing this in.

Notify early and notify properly

A common error is to wait for a formal letter before action. The right time to notify is when you become aware of circumstances that might give rise to a claim — including, for example, a developer's investigative report identifying defects on a project you worked on, or a fire safety appraisal under PAS 9980 raising concerns. Section 7 of the Insurance Act 2015 (notification of circumstances) and your policy's "circumstances" clause are key. See the Insurance Act 2015 hub.

Sub-limits and the costs-inclusive trap

Cladding-related sub-limits are typically costs-inclusive — meaning legal defence costs erode the sub-limit. A defended cladding claim can absorb £1m–£3m in defence costs before any indemnity is paid. A £2m costs-inclusive sub-limit can be exhausted on defence costs alone, leaving the policyholder personally exposed to the underlying damages.

Aggregation — the £100m question

If you designed a standard external wall detail used across an estate, are the resulting defects one claim or many? Aggregation under the wording's "series clause" is decisive. Most modern wordings include a series clause aggregating claims arising from a "common cause" or "single source"; some define this more narrowly. The wording will be litigated. See the aggregation hub.

Subrogated recoveries

Where a developer's PI insurer has paid the developer for the remediation cost, the insurer steps into the developer's shoes and pursues recovery from the supply chain. The original consultant is then defending against another insurer — one with the resources and incentives to litigate hard. The mediated settlements that were common in pre-Grenfell construction disputes are giving way to litigated outcomes more frequently.

Contractual cap effectiveness

Many consultants have contractual limitations of liability in their appointments. Where the underlying claim is a section 1 DPA 1972 claim brought by a downstream claimant, the contractual cap may not bind that claimant — the claim is statutory, not contractual. The cap protects against contribution claims by the developer, but may not protect against direct claims by freeholders or leaseholder representative bodies.

Worked scenario

Facts: In 2008, a developer built a 14-storey residential block of 96 flats. The external wall system used HPL cladding panels and inadequate fire-break cavity barriers. The original architect (Practice A), structural engineer (Practice B) and cladding subcontractor (Specialist C) were all engaged on the project.

In 2023, the Building Safety Fund funded full remediation of the external wall system: £6.8m total cost. The deed of grant required the freeholder to pursue recoveries from the supply chain. The developer was an associate of the freeholder.

In 2024, the freeholder applied for a Remediation Contribution Order against the developer's parent company. The Tribunal made the order in 2025; the parent paid £6.8m. The parent's PI insurer indemnified the parent under the developer's project-specific PI extension and is now pursuing the supply chain.

Issues:

The original DPA 1972 cause of action against Practice A expired in 2014 under the old regime. The retrospective extension under section 135 BSA 2022 brings it back into time — limitation now runs to 2038.
Practice A's PI is a £10m limit with a £3m cladding sub-limit (costs inclusive). Practice A no longer designs cladding and has not done so since 2018.
Practice B's PI is a £5m limit with a full cladding exclusion.
Specialist C went into liquidation in 2019 and has no run-off cover.
The developer's parent's subrogated insurer issues proceedings against Practice A and Practice B in 2026. Specialist C is added in name only (effectively dormant).

Likely outcome (illustrative):

Practice A's insurer responds within the £3m cladding sub-limit. Defence costs are projected at £500k. The remaining indemnity available is £2.5m.
Practice B's insurer declines indemnity citing the cladding exclusion. Practice B funds its own defence and faces direct exposure on the underlying damages.
The case proceeds to trial. Apportionment between the practices is litigated. The developer's insurer settles with Practice A for £2.4m (within sub-limit) and with Practice B for £1.5m (against Practice B's balance sheet).
The total recovery against the supply chain is £3.9m. The developer's insurer takes the rest of the loss.

The point: a single cladding claim cycles through a dozen interlocking insurance and legal layers. Sub-limits, exclusions, run-off, insolvency, costs structures, and apportionment — all matter. Get the architecture right at the front end, because the back end has very few good options.

Sector-specific practical takeaways

Architects: maintain a project register. Document your cladding involvement (or non-involvement) on every residential project. Where your scope did not include the external wall system, get that in writing on the project file.

Structural engineers: structural engineers have been pulled into many cladding claims at the periphery — usually around fixings, load-bearing assumptions and the structural fire performance interaction. Make sure your scope is precise.

Fire engineers: the most exposed discipline. Document scope, document assumptions, document material specifications, and document any restrictions on the use of your report.

Building surveyors (especially EWS1 signatories): keep your file. EWS1 sign-off documentation is being interrogated years later. PI run-off for surveyors with EWS1 history is increasingly difficult.

D&C contractors: Martlet v Mulalley is your case. Document installation QA, supplier specifications and any instructions issued during construction. The contractor's defence in Martlet would have been stronger with better installation records.

Cladding specialist subcontractors: the highest-risk subsector. PI / PL availability is severely constrained. Document everything; align your contractual terms with the head contract; consider whether your business model is sustainable in the new regime.

Frequently asked questions

1. What buildings are covered by Schedule 8 leaseholder protections? Buildings of at least 11 metres or 5 storeys containing at least two dwellings, with qualifying leases granted before 14 February 2022. The "qualifying lease" definition is specific — read it.

2. Can a freeholder pass cladding remediation costs to non-qualifying leaseholders? The Schedule 8 protections only protect qualifying leaseholders. Non-qualifying leaseholders (typically buy-to-let portfolios over a threshold, or non-residential leases) are not protected. But the substantive cost of remediation usually has to come from somewhere other than the leaseholders — the developer, the freeholder, or the supply chain — for the building to be viable.

3. What is a Remediation Contribution Order? An order made by the First-tier Tribunal under section 124 BSA 2022 requiring a specified person (landlord, developer, or associate) to make payments to a specified person to meet remediation costs. The Tribunal has wide discretion on quantum and on apportionment.

4. Does the Building Safety Fund take a charge over the building? The deed of grant secures the Fund's interests by various mechanisms, including recovery obligations on the recipient. The detailed terms vary by scheme version.

5. How long do we have to defend a 1996 project? If you have the original drawings, calculations, specifications and correspondence, the defence is hard but possible. If you do not, the practical defence position is much harder. Document retention has become the single most important operational issue for construction professionals' risk management.

6. We were on a project that was developed by an SPV that no longer exists. Are we safe? Possibly not. The section 121 BSA 2022 "associate" provisions can reach the SPV's parents or controlling parties. The original consultant who can be identified is still in the line of fire.

7. Does the post-Grenfell wave end at some point? The legal mechanisms run for 30 years from the original cause of action under the retrospective DPA extension. The financial recovery process is likely to continue for the rest of the decade and into the 2030s. The peak of supply-chain claims activity is expected in 2026–2030.

8. What is the Building Safety Pledge? A commitment by major developers to fund remediation of buildings they developed or constructed since 1992. Signatories have committed multi-billion-pound sums. The contractual framework is the Self-Remediation Contract entered into between government and individual signatories.

9. What is the difference between PAS 9980 and EWS1? PAS 9980 is a methodology for fire risk appraisal of external walls. EWS1 is a form used by lenders to determine lending viability on a flat in a building with an external wall system. PAS 9980 is the technical standard; EWS1 is the documentary output. The two are related but not the same.

10. Where can I find current government guidance on remediation funding? gov.uk publishes the current schemes; the BSF and CSS pages give scheme-specific eligibility and process detail. The position changes; check the current published guidance.

Sources

Statute — Building Safety Act 2022 c.30, ss.121, 123, 124, 135, Sch.8; Defective Premises Act 1972 c.35, s.1; Civil Liability (Contribution) Act 1978 c.47.

Case law — Martlet Homes Ltd v Mulalley & Co Ltd [2022] EWHC 1813 (TCC); Naylor & Others v Roamquest Ltd [2021] EWHC 567 (TCC) and [2022] EWHC 1591 (TCC); URS Corporation Ltd v BDW Trading Ltd [2023] EWCA Civ 772 (and Supreme Court onward history).

Standards — PAS 9980:2022 (Fire risk appraisal of external wall construction); EWS1 form (RICS / industry).

Schemes — Building Safety Fund; Cladding Safety Scheme; Building Safety Pledge / Self-Remediation Contract.

Reports — Grenfell Tower Inquiry: Phase 2 Report, September 2024; Building a Safer Future, Dame Judith Hackitt, May 2018.

Where this fits

Disclaimer

This is legal and insurance commentary, not advice. The Building Safety Act 2022 regime is technical and fact-sensitive — consult specialist counsel and your broker on your specific position. Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority, FRN 724952.