Block management: Five types of insurance you need and why
For those of you who have previously read my blogs you will be aware that for me the two tenets of property management are “The lease is King” and that any building you manage must be insured.
This would seem relevant as the lease covenants in respect of insurance usually prescribe what insurances need to be put in place. However, as most leases are based on historic covenants, they are often out of date and are not relevant to the insurable risks that are faced by property owners today.
As an aside perhaps, leases being out of date is best illustrated by the covenant in leases that prohibit dancing or fencing within flats, which to my mind are no longer every day activities.
1 Building Insurance
Notwithstanding the above, one insurance which is will almost certainly be required under the terms of any property lease will be for the building itself. This will cover the structure of the property such as the walls and the roof against damage loss and theft as well as any fittings and fitting which you would not take out the property if you were moving.
An insurance Broker once described building insurance as everything that would not fall out of your home if you tipped it upside down and shook it. One anomaly in this, is that carpets are not considered part of the building insurance and need to be covered under your contents insurance, as strangely insurers feel that you could take this with you if you moved.
2. Terrorism Insurance
The next insurance I would always recommend is taken out in respect of a building is terrorism. This may prove difficult on the basis that the lease does not specifically refer to terrorism. Often, a lease will state that the landlord is responsible for ensuring that there is all risks or usual risks cover, in place which would include terrorism.
I have often had Directors remark that their property is not in a high-risk area and therefore terrorism is not relevant. I readily admit that I can see the logic in this but in response I would refer them to Qdime Limited v Bath Building  UKUT 261 (LC) which deemed terrorism as a requirement of the insurance. I would also go so far as to suggest that in the event that an act of terrorism did occur and the building wasn’t covered against this, the responsible persons could find themselves being sued for not safeguarding the best interests of the lessees.
3. Directors and Officers Insurance
At this point it is worth advising that where a Board of Directors are making decisions on behalf of others, then Directors and Officers Insurance cover often referred to as D and O should be taken out.
Again, this is something that is not often mentioned in the lease but on the basis that Directors are taking decisions on behalf of others, it would seem that they should be afforded some protection. D and O cover provides that the Directors Liability is limited and that should they take a wrong decision they cannot be sued personally.
Although this seems to give Directors licence to make mistakes, as there is always a shortage of lessees willing to be Directors, the cost of this cover would seem a small price to pay to protect and encourage them to carry out what can sometimes turn out to be an awful job.
4. Public Liability Insurance
Most building insurance cover will include public liability insurance. This protects the property if a member of the public or an employee suffers personal injury or damage to the property at the property.
It can pay for the costs of subsequent legal expenses or compensation claims and is an integral cover where there can be any question of a claim and where members of the public or are at risk. Again, this may not be specifically mentioned in the lease but would be deemed all risks or usual risks cover.
5. Engineering Insurance
Finally, and again depending on the lease and the property itself, engineering insurance should be considered where there are any electrical installations at a property be they boilers, lifts or electric gates.
It is often thought that these installations are covered under the buildings insurance and often they are covered by insured perils within the main policy. However, if the damage is due to a technical fault or there is a personal injury as a result of the installation this would not be covered.
Taking out engineering insurance provides you with the peace of mind that the installation has been inspected and considered fit for purpose. This inspection acts as almost an MOT, with a report being provided giving guidance on any repairs that are required in order to make it safe. This is definitely reassuring in a world where technical failures are a more common occurrence and where blame can be apportioned.
A good managing agent should give advice on the relevant insurances that are required at your property and ensure that your risk is mitigated.