When you think of industries with rising claims, cavity wall insulation (CWI) is probably not one of your top choices. However, we are seeing clients that have received thousands of claims from new ‘specialists’ against CWI contractors for negligent installation.
There are several points to consider as businesses try to address this issue:
- How retrofit insulation has emerged
- The reason why they’ve emerged from the ‘plasterwork’
- Items that make a property fit or unfit for CWI
- The attritional scale for insurers
- Nature of the claims and tactics deployed
- Legal liability
- Policy cover
Important requirements impacting this industry’s background include the various government energy company obligation schemes from the mid 1990s created by the Department of Energy, Business & Industrial Strategy. They are administered by the Office for Gas and Electricity Markets, the regulator that is required by energy suppliers to offer grants. This led to many CWI companies emerging and existing agents drumming up work.
Here are some of the key factors driving these claims:
- New, profitable revenue stream for claimant firms
- Not subject to fixed costs
- Tour Ops Gastric Illness claims on the wane and Whiplash in the frame
- Paid training courses offered to the Association of Personal Injury Lawyers /others
There is no doubt employers liability and public liability lawyers will survive these changes (the Civil Liability Bill), as well as professional indemnity (PI) firms that deal in travel claims, etc. However, for those who work with Road Traffic Act (RTA) firms, these changes are dramatic and will make it difficult for RTA lawyers to run a practice beyond implementation without diversifying into new areas of law.
And it is important to note that there is strong anecdotal evidence that the original CWI agents/surveyors are selling data.
What defines whether or not a property is suitable for CWI?
- The British Board of Agrèment (BBA) certifies construction products/systems
- CWI companies obtain BBA certificates as System Installers and follow Cavity Insulation Guarantee Agency best practice criteria, which sets clear criteria including the following:
- Cavity must not be less than 50mm wide and the install must be no higher than 12m
- Inner and outer walls must be masonry including brick/block, etc.
- Unsuitable for ‘system built’ walls (i.e., those with concrete panels or steel/timber frames, etc.)
What is the scale of the problem/possible volumes?
- Available data from the Department of Energy & Climate Change:
- 3.1 million homes with CWI installed between ’08-’14
- Assessed as ‘easy to treat’ with an estimated 0.5 million viable for CWI remaining
- The majority of claims we see relate to properties wholly unsuitable for install
- Sub-standard installs are commonplace; many unscrupulous CWI firms
- Some clients are receiving more than 50 claims per week
Nature of claims and tactics deployed
- Identically formatted letter of claim (LOC) with addresses substituted
- Claims incorrectly pursued under the Construction and Engineering Protocol (CEP)
- CEP designed for claims of complexity, typically over £75k
- CEP only allows 28 days from LOC to respond on liability
- Technology & Construction Court usually transfers cases to County Court
- LOCs often packaged with surveyors report, in breach of CEP
- Evidence of damages being inflated above £10K to attract costs
- Unwarranted invasive repairs sought
This is a lot of information; however, it is important to share the additional details below regarding what the policies cover:
- Sometimes the decision to install was incorrect (i.e., not in accordance with BBA or Cavity Insulation Guarantee Agency guidance or contrary to the company’s own/external surveyor's advice)
- PL policies are triggered by ‘accidental’ damage and if the decision to install was knowingly incorrect, insurers may argue that any subsequent damage is not covered
- In such cases, it may not be the materials at fault or the method of installation, rather the decision to install, hence exclusions related to professional duty (i.e., ‘caused by or arising from’ advice, design, etc.) may be sufficient to decline policy indemnity and refer to PI insurers
- PI policies are typically written on a ‘claims made’ basis, as opposed to ‘losses occurring’ PL policies, so PI insurers may face a significant volume of claims arising from historic damage
- If a property was viable for installation, but it was undertaken negligently, PL policies will typically indemnify in respect to the resultant damage (depending on when that occurred), but will exclude the cost of removal and reinstatement of an appropriate replacement
Key points to understand about CWI claims in the market:
- Targeted by claimant solicitors looking for profitable work in a diminishing market
- Difficult to assess volumes, but we envisage claims in the many thousands
- Watch out for the presentational and farming tactics deployed
- Consider your policy response carefully
- Consider your own surveying expertise
- Profin insurers – Don’t write more CWI policies!
This is a complex issue and we certainly are interested in answering your questions or hearing your comments regarding this topic. Our team of experts is well-versed and we look forward to providing any knowledge we can to help you navigate CWI claims.