An architect’s notification relating to the design of a holiday chalet complex. With the project well advanced, it became apparent that the chalets did not have the required level of statutory acoustic separation between them. The Insured had failed to specify the correct acoustic seals materials and was therefore exposed on legal liability.
Following notification, it quickly became apparent that things were time-critical and that the problem needed to be dealt with efficiently and pro-actively – remedial work needed to be carried out with the Insurer’s authorisation on stipulated dates (within a week of notification to us) to mitigate a much bigger business interruption claim that would arise from a prolonged delay to project completion, as well as for project delay/over-run costs. Also, the Insured’s commercial relationship would have been jeopardised if urgent action had not been authorised and taken. On assessing the information obtained, it was clear to us that the Insured was exposed to a valid claim for its negligent design specification. An urgent and collaborative approach was required between all parties involved and we negotiated with Insurers, stressing the importance of getting the necessary remedial work authorised and underway to mitigate the claim exposure, whilst also protecting the Insured’s relationship with its valued client.
Policy coverage issues did arise with the notification in that there was late notification by the Insured and therefore breach of a condition precedent to Insurers’ liability to indemnify. Also, there was no formal claim and no mitigation of loss clause in the policy to invoke. We assessed the situation and demonstrated to the Insurers that that it was a valid notification under the policy. Using our experience and relationship with them, we persuaded the Insurers to indemnify the Insured for the cost of the remedial work required to rectify the acoustic problem.
A further policy coverage issue arose during the course of the remedial works as Insurers would not indemnify the Insured for the cost of materials that the client would have been liable to pay for anyway, even if the design error had not occured. This jeopardised both the remedial works and the Insured’s commercial relationship with its client. We felt strongly that, should the Insurers maintain their stance, the Insured was likely to be subject to a business interruption claim from their client, as well as a claim for the project over-run. Again, we persuaded the Insurers to see commercial sense and indemnify the additional cost incurred.
Overall, our committed, swift and pro-active approach from first notification ensured that a good resolution and settlement was reached in the best interests of the Insured and its commercial relationship with its client.