This case study is an anonymised composite based on publicly reported commercial insurance claim patterns. It is not actual Apex client data and does not constitute legal or insurance advice. Names, locations and identifying details have been changed. Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority, FRN 724952.
A specialist residential property owner-operator based in the South West, around 380 leasehold flats across nine purpose-built blocks built between 2007 and 2018. Annual rental and service charge income £4.8m. The portfolio includes one block which is a high-rise residential building exceeding 18m in height — bringing it within the scope of the Building Safety Act 2022 (BSA 2022) as a “higher-risk building” under the secondary legislation. The properties are held in a series of single-purpose vehicles within a group corporate structure. Insurance is placed through a specialist residential property broker with a combined commercial property owners policy, leasehold protection cover, and the standard combined liability and D&O cover suite for the group.
Following the wider post-Grenfell waking-watch and intrusive investigation programme across UK residential high-rise stock, an EWS1 form B2 assessment commissioned for the high-rise block in the portfolio identified the presence of combustible ACM (aluminium composite material) cladding on the rainscreen façade, combined with deficiencies in fire stopping at compartmentation lines and around penetrations. The assessment identified the block as requiring substantial remediation works to bring it to a satisfactory fire safety standard under the Building Safety Act 2022 and the subordinate regulations.
The estimated cost of remediation was approximately £4.8m for the cladding replacement and associated works, plus a waking-watch cost of approximately £180,000 per quarter pending remediation. The Building Safety Regulator (a function within the Health and Safety Executive established under the BSA 2022) was notified in accordance with the regulatory regime and engaged with the property owner on the remediation plan.
A claim was lodged by the property owner against (a) the original developer of the block (still trading), (b) the original cladding designer (a small architectural practice now in run-off), and (c) the original cladding sub-contractor (in liquidation). Limitation analysis under the BSA 2022 was central — the Act extended limitation periods for “relevant building work” retrospectively to thirty years for defective works to dwellings, displacing the previous shorter periods under the Limitation Act 1980 and the Defective Premises Act 1972.
A parallel question concerned the leaseholder cost contribution. Under the BSA 2022’s leaseholder protection provisions, qualifying leaseholders in qualifying blocks could not be charged for cladding remediation costs and faced limited charges for non-cladding fire safety remediation. The property owner therefore had to fund the works either from its own reserves, from a successful recovery from the developer and design team, or from a combination of government remediation funds (the Building Safety Fund and successor schemes) and its own resources.
The property owner’s claim against the developer, designer and sub-contractor was pleaded at approximately £6.4m: cladding remediation £4.8m, waking-watch costs £720,000, professional fees and project management £380,000, and consequential losses on rental and service charge collection £500,000.
The developer, while still trading, contested liability on a series of grounds: that the design and specification of the cladding had been carried out by the architectural practice and the sub-contractor; that the cladding had complied with the building regulations in force at the date of construction; and that the BSA 2022’s retrospective limitation extension was being applied in a way that exceeded its proper scope.
The architectural practice’s professional indemnity insurer engaged on the design-related allegations. The sub-contractor’s liquidation meant that any recovery from that source was effectively limited to whatever subsisting PI cover the sub-contractor’s directors had carried in their personal capacity (none of substance).
The property owner’s combined commercial property owners policy did not respond directly to the remediation cost — building defect remediation falls outside the standard material damage cover, which responds to insured perils (fire, escape of water, etc.) rather than to construction defects. However, two relevant covers within the property owner’s broader insurance arrangement engaged.
First, the property owner’s combined liability cover responded to the waking-watch cost element on the basis that the waking watch was a measure required by the relevant fire and rescue authority to protect resident safety pending remediation, and that the cost was a public liability mitigation cost within the policy’s “additional costs and expenses” extension. The waking-watch cost was reimbursed at approximately £540,000 across three quarters subject to a £25,000 sub-limit on the extension per quarter.
Second, the directors’ and officers’ (D&O) cover engaged on the personal exposure of the directors of the property owner’s corporate structure in respect of the directors’ duties under the BSA 2022 and the corresponding Companies Act 2006 duties. Defence and representation costs of approximately £180,000 across the regulatory engagement with the Building Safety Regulator were covered under the D&O policy.
The recovery claim against the developer and design team was progressed through specialist construction litigation rather than insurance — the claim was the property owner’s own commercial claim and was not subject to insurance cover on the property owner’s side. The architectural practice’s PI insurer engaged on the defence of the design-related allegations and was the principal source of recovery on the design-related quantum. After approximately three years of litigation including a multi-day hearing on the BSA 2022 limitation point, the matter settled at approximately £3.2m total recovery from the developer and the architectural practice’s PI insurer combined.
The remaining shortfall was funded from a combination of the property owner’s own reserves and Building Safety Fund support obtained through the relevant government scheme.
The cladding remediation was substantially completed approximately five years after the EWS1 assessment. The waking watch was stood down on completion of the works. The property owner’s combined property owners policy renewed at modest increases through the remediation period, with the waking-watch cover specifically reviewed and the limit increased. The D&O cover renewed with a 38% premium increase reflecting the heightened BSA 2022 directors’ exposure profile.
The leaseholder protection provisions of the BSA 2022 were the central reason the property owner carried the unrecovered remediation cost rather than the leaseholders. The property owner’s wider portfolio was reviewed against the BSA 2022 framework with two additional blocks identified as warranting further EWS1 assessment work; both were assessed as satisfactory.
The Building Safety Act 2022 has fundamentally reshaped the residential property owner risk landscape, and the insurance implications continue to develop. First, the BSA 2022 created direct duties on accountable persons, principal accountable persons and the directors of corporate property owners — the D&O cover for property owner groups needs to specifically address BSA 2022 exposure. Second, building defect remediation is not covered by standard material damage cover; recovery from the original construction supply chain is the principal commercial route and benefits from specialist construction litigation engagement. Third, the BSA 2022’s retrospective thirty-year limitation extension under section 135 has created recovery opportunities against defendants whose conventional limitation defences would otherwise have applied; the analysis is technical and requires specialist legal input. Fourth, waking-watch and related interim safety costs may fall within combined liability cover under “additional costs and expenses” or similar extensions, but the sub-limits are often inadequate for prolonged remediation timelines and should be reviewed at renewal. Fifth, leaseholder protection provisions and government remediation funding interact in complex ways with the property owner’s commercial position; coordinated legal, surveying and financial advice is essential.
We would have undertaken a portfolio-wide BSA 2022 exposure review at the previous renewal, identifying the higher-risk building and the corresponding directors’ duty profile, and would have ensured the D&O cover and the combined liability waking-watch extension were calibrated to the realistic remediation timeline. At notification of the EWS1 findings, we would have coordinated the insurance response across the combined liability, D&O and property owners covers, and would have engaged with specialist construction litigation counsel from the earliest stage to scope the recovery claim against the original construction supply chain. The BSA 2022 limitation analysis benefits from specialist advice well before any pleading is finalised.
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