An Example of what may be covered

Note.

The perils discussed below are generally of the type seen in standard property insurance package policies. Nonetheless, landlords have special needs and specialised policies have been designed to meet these needs.

Note.

The perils discussed below are generally of the type seen in standard property insurance package policies. Nonetheless, landlords have special needs and specialised policies have been designed to meet these needs.

For the sake of convenience only, the following notes will be based on the cover provided by a policy underwritten by AXA Insurance and marketed as Landlord Solutions by Hamilton Fraser Insurance (a firm of FSA regulated insurance brokers recommended as their preferred insurance providers by the NLA).

As with most specialised package policies, landlords can pick the types of cover they require and reject those they do not. For example if a landlord decides not to insure the buildings – relying instead on the freeholders building insurance – this he is entitled to do. However the warnings contained in the ‘Why and What should a landlord insure’ section, should be heeded. It is not the intention here to examine every aspect of the policy wording. Rather it is to outline the cover provided, comment where appropriate and draw attention to certain of the Terms, Exclusions and Conditions of the Policy of particular interest to landlords.

N.B. Landlords are strongly advised to always read their policy document and Schedule of Insurance and to check the terms, conditions and exclusions that apply. All policies currently issued ought to be written in plain English and easy to understand. If the policyholder has any queries or doubts the insurance provider should always be asked for clarification.

Section 1 – Buildings

Cover relates to accidental damage to the insured buildings caused by the perils listed below. The policy is not a maintenance contract and should not be seen as such. None of the perils have to originate in or on the insured property for a claim to be valid.

a) Fire, smoke, explosion, lightning or earthquake
b) Riot, civil commotion, labour and political disturbances and strikes.
c) Malicious damage and vandalism
d) Impact by named objects. Comment: Cover relates only to the damage to the buildings and not to the objects that impact with it.
e) Storm or flood. Comment: The word, as with most other words in the policy, is given the same meaning it has when used in everyday conversation. If the average person would describe the incident as a ‘storm’ (which implies the possibility of some structural damage to trees, buildings and other structures) the insurance will operate. It does not mean ‘bad weather’ e.g. persistent rain without heavy winds. Flood can be defined as the inundation of land and the structures built on that land, by the sea and the overflow of watercourses, rivers, canals, lakes, reservoirs etc.
f) Subsidence or heave. Comment: Subsidence is usually defined as the downward movement of the sub-soil beneath the foundations. This results in the foundations being deprived of their usual ground support. It is commonly found in clay sub-soils which shrink as a result of dehydration. Heave is defined as the up-ward movement of the sub-soil beneath the foundations. Most commonly found when clay sub-soils swell as a result of rehydration. It is a rare occurrence. When it does occur it is usually the result of existing massive vegetation – such as a large and ‘thirsty’ tree- being dug up just before the structure is built or any time thereafter.
g) Bursting or leaking of water apparatus and the escape of water from or the freezing of any fixed domestic water or heating installation.
h) Damage to any fixed domestic water or heating or heating installation caused by its own forcible and violent bursting.
i) Theft or attempted theft.
j) Escape of oil from any fixed domestic oil heating installation including smudge damage by vaporization due to a defective oil-fired heating installation.
k) Accidental Damage to the buildings by any other cause. Comment: There are a number of important exclusions to this peril which the landlord needs to read. Basically, the exclusions which apply to the other named perils (see below) are reinforced, but also there are other exclusions which confirm that the policy is not a maintenance contract.
l) Accidental breakage of fixed glass, pedestals, sinks, bidets, lavatory pans, cisterns, shower trays, shower screens or baths (not swimming pools) forming part of the building.

Exclusions

All of the above perils other than a) Fire, smoke, explosion etc. have exclusions attached. As said before it is important to read the policy to check these. The two exclusions are of specific importance to landlords are the unoccupancy clauses and the exclusion of damage occurring in Northern Ireland.

• Unoccupancy. This exclusion applies to all of the named perils except fire etc. Damage caused by the peril to any private residence that has been unoccupied for more than a certain number of consecutive days before the event is not covered.
• Northern Ireland. The perils Malicious Damage and Theft etc. are not covered in Northern Ireland.

Extensions

There are a number of extensions of cover that are of particular interest to Landlords

a) Additional Expenses necessarily incurred for rebuilding or repairing the insured property as a result of damage from an insured peril. Namely
i. architects, surveyors and legal fees
ii. The costs of clearing debris from the site or demolishing or shoring up the property
iii. Other costs to comply with government or local authority requirements.

b) Pipes cables and drains The cost of repairing accidental damage cables etc. servicing the insured property, excluding damage for which the insured is not legally responsible and damage caused by rust, corrosion and wear and tear.

c) Trace and Access Costs incurred in locating the source of damage caused by leaking or overflowing water and of blocked/damaged pipes cables and drains. There are limits of indemnity.

d) Accidental Breakage of Glass and Sanitary Fixtures but not while the residence is unoccupied as per Exclusions above.

e) Damage to Landscaped Gardens caused by the Emergency Services attending as a result of the operation of an insured peril. There is a limit of indemnity.

f) Theft of Keys The cost of replacing external door locks stolen whilst in the personal custody of the insured person or his/her authorized employee key-holders. There are limits of indemnity.

g) Loss of Metered Water or Oil The unit cost of metered water or oil lost as a result of peril g) and/or j) above. There is a limit of indemnity

h) CCTV The cost of repairing accidental to CCTV systems at the Block of Flats. There is a limit of indemnity.

i) Carpets in Communal Areas Damage to fitted carpets in the communal areas of the block of flats.

j) Removal of nests of wasps or bees from the blocks of flats or private residences. There is a limit of indemnity.

Special Clauses

There are a number of special clauses which are self explanatory and are all to the benefit of the tenant. Of particular interest to landlords is sub-clause i) Extensions and Alterations, sub-clause ii) Reinstatement of Sum Insured, sub-clause v) Inflation Protection and sub-clause vii) Tenants Subrogation Waiver.

Basis of Settlement

This clause sets out the method used to indemnify the insured. This is stated as being the cost of rebuilding or repairing the buildings or by paying a sum of money equivalent – all provided the Sum Insured is adequate. There are other provisions which should be noted.

Section 2 – Contents of Common Areas, Landlords Contents or Contents of Furnished Private Residences.

There are several important exclusions to the type of property insured. In brief they are:

• Landlords fixtures and fittings insured under the Buildings section
• Valuables; such as articles made of precious metals, cameras etc.
• Money, bills of exchange etc.
• Works of Art in excess of £a specified amount
• Property insured elsewhere
• Property in the open
• Pets and livestock
• Motor vehicles, caravans etc.
• Tenants property

Check the policy for full wording:

Perils Insured These follow those insured by the Buildings Section except for Accidental Damage by any other cause.

Extensions The following are also covered:

• a) Accidental Breakage of fixed glass in furniture. Note the exclusions
• b) Landlords Gardening Equipment whilst in a locked out building. Theft not accompanied by entry or exit by forcible or violent means is excluded. There is a limit of indemnity
• c) Non Invalidation. If the risk of damage or destruction is increased unknown to the insured, the insurance under this section will not be invalidated; provided the insurers are told immediately the insured becomes aware.

Basis of Settlement: This either:

• a) The cost of repair, or
• b) The cost as new less a deduction for wear, tear and depreciation

Inflation Protection This sub-clause is similar to the sub-clause in the Buildings Section but simpler. Basically, it says that in the current year of insurance the Sum Insured will be adjusted monthly in line with the rate of inflation at no cost to the policyholder.

Section 3 – Alternative Accommodation and Loss of Rent

This section covers

• i. Loss of Rent – including ground rent and management charges – which you must pay or should have received.
• ii. The reasonable costs of alternative accommodation and temporary storage of furniture while the let property is unfit to live in or access to it is denied;

all incurred as a result of damage insured by the policy of which this section is a part.

There is invariably a limit of indemnity, which is usually about 30% of the sum insured

Section 4 – Public Liability

This section covers the insured for damages, costs and expenses for which the insured is legally liable in his/her capacity as a landlord as a result of

• a) accidental death or injury to any person and/or
• b) accidental loss of or damage to property.

There is usually a limit of indemnity in respect of any one accident or series of accidents from any one cause.

The policy does not cover injury to employees, or loss of damage to property owned by the insured or for which he/she responsible. Also, the policy does not cover, with minor exceptions, death, injury, loss or damage arising out of the ownership or use of water and air craft or any vehicle that is or should be licensed for road use.

In addition to the above, the policy also covers the insured for legal costs and expenses, but not fines or penalties, arising from the defense of prosecutions brought under the Health and Safety at Work Acts.

Section 5 – Employers Liability

This section covers all sums the insured in his/her capacity as a landlord becomes legally liable to pay as a direct result of accidental death or injury to any employee of the insured. The death or injury must arise out of and in the course of the injured person’s employment by the insured.

As with the Public Liability section, there is usually a limit of indemnity and the policy does not cover accidents arising out of the use of any vehicle that is or should be licensed for road use

Section 6 – Terrorism

As stated in Part 4 of this exercise, this cover is usually excluded from most insurance policies but can be purchased if needed.

Terrorism has been defined for the purposes of insurance as:
‘An act including but not limited to the use of force or violence, by any person or group of persons, committed for political, religious or ideological purposes with the intention to influence any government and/or to put the public in fear’

The policy we are using as a demonstration offers terrorism cover, if required, for an additional premium. Please make enquiries for details

General Exclusions and Conditions applicable to Sections 1-6

These are self-explanatory and should be carefully noted.

Landlords are urged to take particular notice of the Hazardous Work Exclusion and the Unoccupied Buildings Condition.

Sections 7, 8 and 9 Legal Costs

Legal Costs (often referred to as Legal Expenses) insurance is almost always underwritten by specialist insurance companies. It is most often added as a ‘bolt-on’ to one or more of the standard type of insurance policies offered by general insurance companies.

In this context, ‘bolt-on’ means that although the insurance is noted as being included in the schedule of the host policy, and the first premium and renewal premiums are collected directly by the first insurer, the underwriting criteria are set by the second or specialist insurer. Moreover, if the Landlord/insured decides to make a claim, all dealings, from the time the claim was made until its conclusion, will be with the specialist insurer or their agents.

The comments below relate to insurance policies directed at Landlords, e.g. Landlords Solutions marketed by Hamilton Fraser insurance and underwritten by AXA Insurance.

Section 7 – Landlord’s Property Legal Costs Insurance

Under this heading, the cover provided is: for:

A. The costs spent by the specialist insurer’s solicitors in pursuing legal proceedings for nuisance or trespass against anybody who infringes the insured’s legal rights in relation to the insured property. There is a ‘waiting’ period before the insurance can be called upon. That is to say, for a claim to be valid the nuisance or trespass must have commenced not earlier than180 days (or whatever period is stated in the policy) after the insurance was first purchased. N.B. There is no cover for disputes arising under a Tenancy Agreement or any other lease or licence to occupy property or land.

B. The costs spent by the specialist insurer’s solicitors in defending Criminal prosecutions brought against the insured in relation to the insured property under:
i. The Gas Safety (Installation and Use) Regulations 1994
ii. The Furniture and Furnishings (Fire) (Safety) Amendments Regulations 1993
iii. The Electrical Equipment (Safety) Regulations 1994
N.B. Damages, interest, fines or costs awarded in criminal courts are specifically excluded

In respect of B above, the insured must take all reasonable steps to comply with the Regulations and to keep evidence of compliance. Failure to do so may mean the insurer will refuse the claim.

There is usually a limit of indemnity and an excess.

As may be expected, there are a number of General Exclusions and Conditions which are specific to this type of insurance. Of particular interest to Landlords is the exclusion of claims arising from a dispute between the insured (the landlord) and his agent or mortgage lender.

This section also provides a Legal Advice service in respect of any legal problem in connection with the insured property. Specialist lawyers are available 24 hours a day to give free advice over the telephone. If you wish to take advantage of this service or wish to make a claim, phone the number shown in the body of this Section of the policy.

Section 8 – Landlord’s Tenancy Legal Costs Insurance

An insurance of a similar nature to the preceding section but this time providing cover for the costs spent by the specialist insurer’s solicitors in pursuing legal proceedings against a tenant or guarantor, where the tenant fails to perform his obligations set out in the tenancy agreement relating to the rightful occupation of the insured property.

Because, as has been explained, this Section is the equivalent to an additional insurance in its own right, there is included a list of words with explanations (Section Definitions) that are specific to this type of insurance. In the event of a claim, these definitions are crucial to the decision on whether or not the claim is valid so it is of utmost importance that the policyholder studies these definitions carefully. In reality many of the definitions could be seen as part of a framework for ‘Best Practice’ for Landlords, so there should not be many nasty surprises!

There are a number of exclusions that are specific to an insured incident and General Exclusions and Conditions which relate to the cover as a whole. As with Section 7, there are too many to name individually but they are clearly stated, easy to understand and should be noted carefully. It is very important that you do so.

A Limit of Liability is normal.

This section also provides a Legal Advice service in respect of any legal problem in connection with the insured property. Specialist lawyers are available 24 hours a day to give free advice over the telephone. If you wish to take advantage of this service or wish to make a claim, phone the number shown in the body of this Section of the policy.

Section 9 – Landlord’s Rent Guarantee Insurance

N.B. The cover under Section 9 only applies if the landlord has purchased Landlord’s Tenancy Legal Cost Insurance and it is shown as being covered in the Schedule.

The base cover is in respect of rent owed by a tenant under a tenancy agreement relating to the insured property up to the limit of indemnity stated in the policy. For the cover to apply the failure to pay the rent on the due date must have occurred during the period of the insurance. Where this is appropriate, the landlord must also be using the cover provided by the Landlord’s Legal Costs section of the policy to evict the tenant.

An excess and a limit of indemnity is applicable. The limit of indemnity relates to a maximum payable per month and per claim.

The insured must report the failure to pay within forty-eight days of the first failure to do so; otherwise the claim will be rejected.