We often find ourselves suggesting to clients that it would be advisable to put in place indemnity insurance policies to cover risks that cannot easily be resolved another way. The range of policies available is extensive and can cover anything from chancel repair liability to missing documentation. Below are a number of key points that need to be considered when looking to put an indemnity policy in place:
Does the policy solve the problem?
The existence of an indemnity policy does not cure the defect, for example a policy that covers a chancel repair liability does not prevent a church from claiming costs towards the repair of a chancel. Generally, the aim of the policy is to cover the loss in value of a property which is caused as a result of that defect.
Is the defect covered?
As strange as it may sound, there are a number of policies available which appear to cover the risk in question, but when you read further into the policy actually exclude the risk you are trying to insure against! For example, it is not uncommon for mines and minerals policies to exclude claims relating to trespass. The key message is to check the exclusions clause.
What costs are covered?
Not only should you be checking that the correct defect is covered, you should also ensure that you are comfortable with the loss that is covered by the policy. Some policies will cover a loss in market value arising as a result of the defect, while others will also cover legal costs and business interruption. If there is a specific loss that you want to protect against, make sure that you let us know at an early stage.
Who is the insured party?
You should consider who needs to benefit from a specific policy. Should this be just you as owner/buyer, or does it also need to cover successors in title and mortgagees? It may be cheaper to cover these parties at the outset rather than trying to obtain an endorsement to a policy later down the line.
It is important to disclose any relevant information relating to the risk to the indemnity broker. For example, an indemnity broker will require information regarding the proposed use of the property, the anticipated development value of the Property and details of any additional documentation (such as statutory declarations) that may be relevant to the policy. If you are found to have withheld any information or misled the insurer, then the policy may be invalid. However, you should also be careful not to put a third party on notice of a risk, for example, if you are looking at obtaining a policy for a lack of planning permission, you should not speak to the council about the issue. This could result in indemnity insurers refusing to cover the risk.
Have you paid in time?
The cost of an indemnity policy is usually a one-off payment, and as above the policy can often cover successors in title without any additional payment needed. Most indemnity brokers require payment to be made for a policy within 2 weeks of the cover date. If the payment is not made, the policy may automatically be invalidated. It is therefore important to put your solicitor in funds for the policy premium when asked for it.