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Insurance Of Tenants' Works

QUESTION: I have appointed a contractor to make changes to the layout of the offices where we are tenants. Are we responsible for insurance of the works or is this the landlord’s responsibility?

In most cases, cover falls within the basic building insurance arranged by the landlord, so check your lease.

Assuming the landlord is responsible, notify it of the value and the duration of the works. Make sure it has arranged cover with the building insurer, such as joint insured statutes or waiver of subrogation. There may well be a cost to you for this additional cover.

Joint insured status adds your contractor to the landlord’s insurance policy, but take care, as specific risks, such as accidental damage, may be excluded. Under a waiver of subrogation the insurer agrees not to pursue your contractor for redress in the event of a claim.

It is possible that the landlord will refuse to provide either joint insured status or waiver of subrogation. If this happens, notify your contractor and ensure any other insurance arrangements are in place. Otherwise it is likely that you will be in breach of contract with your contractor and potentially liable for any losses, which could be significant if other tenants are affected.

When a separate insurance programme is arranged it should be in the joint names of your business and the contractor. Remember to budget for the insurance and make sure that it covers all eventualities, such as who takes insurance responsibility for works under any phased handover.

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