'Numbers and letters': 10-year latent defect insurance and claims for construction damage in Spain
For construction damage claims, it is necessary to clarify the type of damage and to fit it into the classification established by the law. As a result of this interpretation, the potential cover for damage will be determined as well as the possible liabilities of the different construction agents (architects, developers, constructors etc.).
The 10-year guarantee or 10-year compulsory latent defect insurance covers construction damage and defects to dwellings of the so-called structural nature. To handle claims correctly, it is necessary to clarify the extent and limits to cover, as well as the position of the parties involved.
Claims for construction damage
Reality is always better than fiction. This is frequently noted by lawyers, especially those that dedicate themselves to insurance, when dealing with proceedings for construction damage.
Our starting point will always be the policy conditions which have to be interpreted with reference to the Insurance Contract Act and other related regulations. When dealing with specific claims for construction damage in Spain, we also have to take into account the legislative framework (the Spanish Building Regulations Act, the Building Regulations Technical Code etc.). That is the theory-the 'letters'.
Upon studying the information of the claim, it is necessary to analyse eminently technical questions characteristic of these claims: the 'numbers'. Execution projects, structural calculations, plans, expert reports etc. For this task, it is vital to rely on the assistance of experts that can technically analyse the claim. It is necessary to delimit the existence of the damages that have given rise to the claim (dampness, leaks, cracks etc.) as well as to determine the causes of the same.
Once the diagnosis has been made, our work consists of helping to determine whether the damage is covered under the policy or which damage is covered. Furthermore, we must determine on which construction agents (architects, developers, constructors etc.) liability could fall in accordance with the framework of the Building Regulations Act.
Therefore, our work is to provide assistance with the analysis that allows us to clarify whether or not the "numbers" of the claim fit in with the "letters" of the policy and the applicable regulations.
10-year latent defect insurance
From the broad experience of Kennedys related to construction sector insurance, we have faced a wide spectrum of claims and lawsuits.
In the specific case of 10 year Latent Defect Insurance, we have collaborated with our clients both on claims handling and litigation defence in judicial proceedings related to construction defects. As a result of this experience, we have found recurring problems that are generated during claims handling. Here are some examples:
- Correct calculations of guarantee periods and statutes of limitation. The guarantee period of latent defect insurance is 10 years. However, the statute of limitations (two years) is the period available to the aggrieved party to claim for the loss once damages appear, a period that can be interrupted and restarted.
- Lack of knowledge of the damage excluded from cover. Damage caused by force majure or by acts of third parties and damage to movable property or adjacent properties are not only excluded in policy wordings, but also by application of Section 19.9 of the Building Regulations Act (unless there is an agreement to the contrary).
- Extensive interpretation as to the concept of structural damage. Sometimes, claims use the generic argument of "ruinous defects". This gives rise to an important difficulty as it leads to confusion about the extent and entity of the damage, which requires the insurer to make clarifications.
- Confusion between the 10-year latent defect insurance and other types of insurance, specifically with the civil liability insurance of the developer. Without doubt, the fact that the insurance is initially contracted by the developer contributes to this confusion.
- Application of under-insurance and deductible. These have to be taken into account when calculating claims and explained to the insured, who in the majority of the cases is unaware of the insurance conditions that were contracted.
All of these difficulties are in addition to other problems that arise with claims and judicial proceedings in the framework of the 10 year Latent Defect policy. Therefore, in the ambit of construction damage, adequate timely assistance to clarify, amongst others, the nature of the risk covered, the coverage limits, risk exposure and the correct strategy to minimise the costs of the claim, can be of great utility to clients.