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INHERENT DEFECTS INSURANCE

Following completion and handover, defects can arise during the life of a building in the structural frame, cladding, foundations or other components.

This can be an area of great concern to employers, developers, tenants, financiers and other parties with an interest in securing the long term protection of their investment in a new building project.

There will usually be problems when trying to recover the full cost of repairs as this will require the damage to be covered under permanent building insurances or proof that a professional consultant or contractor is legally liable to pay for repairs. Change of ownership and lack of contractual relationships complicate the issues and often consultants and contractors do not have adequate insurance at the time of loss to cover the repairs.

Inherent (or latent) defects insurance provides cover for the cost of repairing a property should an inherent defect in the structure cause damage or threaten imminent damage.

Cover is usually provided for a maximum period of twelve years from the date of practical completion, but may be arranged for shorter periods if required.

It offers a long term protection of the investment in a new building project which cannot be cancelled by insurers and payment of claims on the basis of damage having occurred, giving faster settlement than if legal liability has to be proved.

It can be extended to include indexation for inflation; defective waterproofing and underground seepage; loss of income, removal expenses and additional costs incurred in occupying alternative premises; and cover for non-structural components (such as mechanical and electrical installations).

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