The BSA came into force on 1st April 2023, creating a new safety regime for in-scope buildings, with more onerous requirements for ‘higher-risk buildings’ (HRBs). Provisions included new regulations, roles and responsibilities for the various parties involved in the design, construction and occupation of impacted buildings. Secondary legislation has introduced further change, including a new ‘Duty Holder’ regime for Principal Designers, Principal Contractors and Clients, applicable to all construction projects
It is beyond the scope of this article to outline the numerous changes. Instead, recognising the impact that these changes will have upon the professional liabilities of those firms involved in the design, construction and maintenance of ‘in-scope’ buildings, it focuses on a few areas from a PII perspective.
It is still early days to assess the impact of the BSA legislation, but it is clear that PII Insurers continue to watch the space closely. The recently published results of the Grenfell Enquiry have propelled residential fire safety concerns back into the limelight, and popular frustration at the lack of remediation progress and at how firms and individuals ‘at fault’ are dealt with is sure to keep fire safety issues under the microscope.
Increased claims activity
Ultimately, anything that could lead to increased claims activity will concern Insurers, and a raft of complex enforced changes against an ongoing backdrop of fire safety concerns could certainly be conducive to further related claims (of which a huge number have been made since the Grenfell tragedy). Fire-safety related claims have frequently proved long and protracted, and lengthy disputes can be very costly for Insurers. Greater regulatory and stakeholder scrutiny on building projects, particularly in relation to fire-safety matters, is likely to unearth more problems.
Confusion and uncertainty
Extended limitation
The BSA updated the Defective Premises Act (DPA) to include refurbishment projects, and extended limitation periods for compensation claims (up to 30 years for retrospective works). This gives scope to claims being made in relation to previously time-barred issues (or possibly even the reactivation of time-barred matters) and is a key concern for insurers. Clearly, historic documentation going back many years may not be readily available, and project teams are more likely to have moved on, meaning some ‘first-hand’ accounts that could have proved invaluable from a claim defensibility perspective will be unavailable. Further, with an evolving scope of potential fire / building safety issues (and regulations) comes the risk that additional matters which could prompt PII claims will emerge.
A duty to warn
Another consideration stems from the BSA’s requirement for designers to take the work of all other designers on a project into account, with a duty to report any potential non-compliance with all requirements to the Principal Designer. This requirement creates a potential ‘duty to warn’ exposure for those designers should they fail to discharge those duties.
This is far from an exhaustive list of concerns. Ultimately, given the BSA’s infancy (and absence of case law), PII insurers will need to keep a watching brief. They will need to wait until cases go to trial before getting a better understanding as to how courts will interpret all aspects of the new legislation.
Understandably, firms may be concerned about how their PII policy might respond in relation to liabilities resulting from the BSA. On the surface, the new duties and responsibilities for designers and contractors providing professional services don’t seem to be materially different from existing roles performed by those firms involved in residential building projects. But with the new regulations come potential new liabilities for those involved.
No change so far
To date, we have not seen any additional restrictions imposed on construction / property PII policies in relation to the BSA legislation - beyond the standard Fire Safety and Cladding claim restrictions and/or exclusions that have been enforced on most PII policies since the Grenfell Tragedy (pre-dating the BSA). So, PII policy coverage would typically apply to liabilities arising from the BSA, subject to policy terms and conditions.
Each wording is different
Of course, each PII policy wording needs to be reviewed on its own merits, to ensure that the coverage provided is sufficient and that there are no exclusions which could serve to carve out coverage, nor definitions insufficiently wide to preclude potential indemnity.
Defence of criminal / regulatory proceedings cover
Non-compliance with aspects of the new BSA regime is a criminal offence, and Duty Holders have statutory responsibilities in relation to a building’s safety. Possible sanctions from the Building Safety Regulator include potentially unlimited fines, even imprisonment. Whilst fines / criminal liability wouldn’t be covered under a PII policy, construction & property sector PII policies will usually include some cover in respect of costs incurred in the defence of criminal / regulatory proceedings brought under various statutory regulations relating to building or construction works (always with certain caveats). Firms should check that their PII policy includes such protection and ensure that the BSA legislation would act as a trigger for said cover.
Understand what is required
Clearly, firms will need to understand exactly what is required of them on all ‘in-scope’ projects, to ensure that all responsibilities and obligations are discharged. Indeed, given the concerns about the complexity and wide-reaching scope of the still-evolving BSA, it would be prudent for firms to ensure that there are individuals with an understanding of the BSA to be attached to all projects. If firms don’t have such expertise to hand, then they should consider engaging external help.
Engage with insurers
Document retention
Document retention has always been important from a PII perspective, not least in terms of claims defensibility. The extension to limitation periods will amplify its importance, as the ability to call on information going back decades could make all the difference in the defence of a claim which creeps out of the woodwork after many years. Further, the BSA imposes an obligation on Duty-Holders to report safety-related incidents to the Building Safety Regulator, and to ensure that essential information about a building’s design, construction, and maintenance is preserved and accessible throughout its life. In terms of the BSA’s competence requirements (and in anticipation of potential claims), firms should also ensure that they are able as best possible to demonstrate their competence and also that they have the required ‘organisational capability’ (as defined in the BSA) to discharge their role – keeping such evidence on file. And of course, firms will need to be able to confirm and evidence that the various new BSA roles and responsibilities have been adhered to in the event of a claim.
Contractual liabilities
Firms should be careful to ensure that the contractual terms into which they enter don’t extend their duties beyond the statutory role (for example, in terms of the breadth of duty or the duty of care they’re contractually held to), and that they don’t make warranties about the performance of their (or their supply-chain’s) services and/or competence.
Supply chain risk
The provisions of the still-evolving BSA are evidently complex, and the ramifications of the fundamental changes it brings will take time to become apparent, as will its full impact on the PII landscape. It clearly warrants full attention and consideration from all parties involved in all construction projects, and evidence of appropriate understanding and risk management process will be hugely significant in terms of how PII insurers see a firm’s risk profile.
