The Importance of a Financially Stable Contractor – A Carillion Case Study

9th August 2018

Sometimes when working on a project, you will need to appoint a third-party contractor to assist you with certain aspects of the project whether it be the construction, insurance (self-build or normal) or supply of materials, to name a few. These experienced specialists offer their products or services at a price, knowing that the chances are the average person would struggle to replicate the quality for the same price. Third party contractors can be especially useful in complicated areas like specialist self-build insurance or safely supplying rare or heavy materials for a project. However, third parties can also be problematic if they do not deliver.

A project can go from nearly finished and on budget to never being finished and massively over budget in a matter of months if a contractor’s finances are not secure. In the case of Carillion, their finances looked relatively ok for a firm their size right up until the collapse with only a few very small warning signs. Carillion were too optimistic in taking on risky contracts and relied too heavily on borrowing to offset their huge pension deficit. At a certain point the banks said enough is enough and refused to lend them any more money and Carillion was left in serious financial difficulties. This highlights the importance of properly vetting your contractors or suppliers as a little bit of time spent researching and investigating may be able to save yourself time and money.

So how do you check a third-party contractor is financially sound? The first place to look is the Company House website. Almost always the company will have a page on Company House. On there you will be able to see some very basic financial accounts which at least gives you the peace of mind the finances are being processed correctly and the company is profitable. However, this is often not enough to be sure. Further steps can be taken to achieve peace of mind such as looking at their track record and seeing what their previous clients have said about them, tax returns, current debts and debt expiry dates, details of any subcontractors and looking at any other contracts they are currently working or are due to work on in the future.

Remember to always carry out as thorough checks as possible when it comes to utilising a third party. It is crucial to check for strong finances, but it is also equally as important to check for reviews of what others have previously said about a third party. Here at Proaktive we pride ourselves on great customer feedback and that often means clients come to us first for their insurance needs. If you have a project you’re planning, then why not get in touch and we will be more than happy to provide a self-build insurance consultation.

www.selfbuildinsure.co.uk

A-Rated Insurers

25th May 2018

Early this month saw the collapse of Alpha Insurance who supplied 10 year structural warranty insurance. This means that anyone purchasing a policy through Alpha is effectively left without cover and are probably still unaware. As yet no plans have been released on how customers will be affected going forward.

A warranty is designed to cover you against structural defects that occur within 10 years of completion so the importance of purchasing a policy with A-Rated insurer cannot be underestimated.

Put simply, an unrated insurer is one that does not carry an insurer financial strength rating given by international rating agencies, such as Standard & Poor’s 500 index , A.M. Best or Fitch Ratings. While it isn’t a perfect system the insurers rating provides an assessment of the financial strength of an insurance organisation and its ability to pay claims to its policyholders.

If you have an Alpha insured warranty & you sell your house within the 10 year period, the warranty could be an issue as the rights under the Financial Services Compensation Scheme will not apply to the new owner. Anyone purchasing the property within the first 10 years that also require a mortgage will find themselves unable to do so without a structural warranty in place at the insistence of the finance provider.

This effectively means you will have to buy a retrospective warranty which will be more than your original policy due to it requiring an expensive completed housing survey.

If you are affected by the collapse of Alpha and require advice or a quotation please do not hesitate to contact Andy or Beth on 01302 346831 or via email selfbuild@proaktive.co.uk

Renovation Insurance FAQ’s

4th April 2018

Renovating a house may seem a simple process in terms of insurance but there are common misconceptions surrounding it.

We are asked a couple of questions regularly:

I have household insurance why do I need a different policy? Standard household insurance isn’t designed for large scale renovation work, so you must inform your insurer before your project starts. In most cases they would look to cancel your policy and while some may continue cover, they will more than likely do so on a restricted perils basis. Some insurers will have a clause built into the policy so when work goes over a certain sum insured cover will cease or be restricted.

Similarly should the property be unoccupied either throughout the build or for long periods during it, they will restrict cover generally to FLEA (fire, lightning, earthquake and aircraft) making the cover relatively worthless. Most home insurance policies will have a limit on the time that cover is provided for periods of unoccupancy, which will be vary between 30, 60 or 90 days as a rule.

My builder has a contract works insurance policy so I don’t need my own insurance? The simple answer is yes you do. Your builder’s contract works policy will only cover materials they purchase and in terms of liability only cover any accidents they are held liable for. Your contractor cannot cover the existing structure as they have no insurable interest in it, nor can they cover accidents that occur on site that you are held liable for.

Public and employers liability are often forgotten parts of insurance. Thankfully claims are few, but should an accident occur on site, they can easily run into six figures once legal costs are factored in, and particularly if long term care or physio is required. It’s easy to dismiss, however something as innocuous as providing a set of ladders to a contractor which they subsequently fall from and break an ankle can lead to a large claim.

A further example of a claim we experienced was a kitchen designer working on site, who fell over an exposed floor beam resulting in a broken leg. This led to a five figure claim.

Is there anything else I need to think of before undertaking a renovation? Yes there are a number of additional things to think about. If the work you are undertaking requires a party wall agreement it is worth looking at some additional cover. JCT clause 21.2.1 or 6.5.1 as its now known put simply is non-negligence insurance. It is designed to cover damage to neighbouring homes where neither you nor your contractor are at fault for the incident. It is particularly useful if you are extending a semi or terraced house where the chances of damage are enhanced.

Whether you decide to take additional JCT 6.5.1 cover or not I would suggest drawing up a schedule of dilapidation. This means looking over your neighbours’ properties and documenting any existing damage such as cracking, by taking photos including internally if your neighbours will allow it. This will stop any frivolous claims for pre-existing damage.

The last thing to be aware of is if your contractor asks you to sign a joint contract clause either 5.4 A, B or C for example. I would expect to see this in larger builds where you pay your builder in stages as they complete parts of the project. Signing the clause impacts on your insurance as it effectively makes the contractor a joint insured alongside the policy holder.

This means that if an incident occurs which has been caused by your contractor the insurer cannot claim its losses back from the contractor as it would normally. In insurance terms this is subrogation. If you do sign the clause make sure you inform your insurer as it can impact on the cover or the premium you will pay for it.

ProAktive are experts in renovation insurance so if you have any queries regarding the project you are undertaking please do not hesitate to contact us on 01302 346831 or via email selfbuild@proaktive.co.uk

ProAktive Proud to be Part of the Ideal Home Show’s 110th Anniversary Celebration Event

13th March 2018

The ‘Ideal Home Show’ was originally established by the Daily Mail newspaper in 1980. It was predicted by the publisher to be a method of generating funding through growing advertising revenue.

At the time the show was first founded and opened its doors to the British public, a large percentage of the population didn’t own homes and instead rented properties. As living standards improved due to enhancements in mass production methods, society in general began to have more disposable income, which opened up the possibilities of owning a home.

During the 1920’s the show featured gardens that were lit by unique gas lamps. These lamps imitated daylight, allowing flowers to be seen in their true colours. Visitors were often wowed by the gardens and the people who created them.

The 1930’s saw the show gather more interest and status through the launch of a variety of new gadgets such as the vacuum cleaner, electric kettle and the toaster. These are now everyday items that people take for granted, but at the time they were ground-breaking inventions, all of which were introduced to the public through the Ideal Home Show.

The show was suspended during World War Two and didn’t open again until 1947. During the next few decades the show’s popularity grew further and gained a record attendance of 1.5 million visitors in 1957. Attendees of the day would have witnessed the first fitted kitchen. During the 1960’s, celebrities including Tom Jones, Eric Morecambe and the Rolling Stones visited the show. Queen Elizabeth II also attended eleven times too.

Throughout the 1970’s and 1980’s whole villages were constructed at the event, and by the 1990’s budding architects were given the opportunity to take part in a competition to have their designs built there. In more modern times the show has also tackled green issues and featured the first green kitchen with energy saving appliances, CFC – free cleaners and wood from sustainable sources.

This year the Ideal Home Show marks it’s 110th Anniversary. The event will take place between 17th March to 2nd April at the Olympia in London. The show will feature a renovation advice hub which provides the chance for attendees to gain face-to-face guidance and tips from industry experts. This year ProAktive are proud to be one of the specialists taking part in this.

If you are thinking about undertaking any type of self-build project, whether it is a new build or changes to an existing property it is very important that you have the right level of self-build insurance in place to provide you with the protection and peace of mind you need when carrying out such a complex project. For more information about self-build insurance please visit: www.selfbuildinsure.co.uk