Q&A - Insurance Policies

I am a leaseholder and shareholder of an historic estate west of London. There are three main buildings on the same insurance policy, one Grade I 9 flats , another Grade II 4 flats and the third just 20th century 3 flats. The schedule currently shows the cover and premium for each of the buildings.

The Grade I had a major fire five years ago and has not been completely rebuilt (outer walls only) due to the underinsurance and is the subject of a legal case. As there are 3 totally different buildings, the other Grade II and the 20th century want to have separate policies. We have been advised by our Board that the insurance broker states this is not possible, the Managing Agents say it may be. The leases say that the lessor has to adequately insure the properties but it does not mention that they have to be on the same policy. Since the fire, by the way, there have been several LVT tribunals finding against decisions taken by the Board which is made up of residents.

Initially after the fire the insurance company would only take on the Grade I if it had the three buildings and the rest of the estate i.e. the gardens, walls and road (23 other buildings arrange their own building insurance). So we were forced into accepting it at the time. The insurance premium has quadrupled and we want to know if we are getting the cover at the best possible premium.

We are concerned also that there are arrears from the Grade I residents as they have not moved back and if their share of the premium is being paid. Also we feel that with separate policies if another incident occurred in either of the 3 buildings it would not affect the other two as it has now.

Can we be forced into accepting being on the same policy if a cheaper premium can be found for a particular building?

Name Withheld

ANSWER

Theoretically if you wanted to insure the blocks separately you would need to issue a policy for each separate building and then a separate policy to cover the grounds, outbuildings and walls etc. The policies would need to have the definition of buildings amended accordingly and great care would need to be exercised so that no gaps in the cover are left for items such as underground services.

However in practice it will probably be difficult to find insurance carriers who are prepared to structure their policies correctly in order to facilitate this. Ultimately the controlling issue here is most likely to be the lease and specifically the ability of the lease to control how the insurance premiums are collected. If this forms part of the service charge and is allocated to individual flats on a percentage basis then splitting the policies may have no advantage.

Paul Robertson, Managing Director of 1st Sure Ltd