How long is a builder liable for their work in the UK?
Setting a liability period is a key part of drawing up a building contract, allowing both you and the client to have clarity on what is expected of you and your work going forward.
Being clear and specific has many advantages, not least helping to avoid confusing disputes caused by ambiguous wording and subjective phrasing. In other words, it can save you time and money - so how do you do it?
How long is a builder liable for defects?
When it comes to setting your liability period, the majority of builders go for something between one to two years. This is the industry standard, and is considered a good compromise for both client and contractor. However, this doesn’t mean you have to use a figure in that ballpark.
A longer limitation period could give clients greater peace of mind and confidence that you’ll do the job properly. On the other hand, it could leave you vulnerable to excessive claims - which could result in you being out of pocket.
It’s important to note that any limitation period should be set out in your contract before any work is carried out. This makes the conditions of your labour explicit so that neither party can claim they didn’t know what they were getting into. Of course, if you or your client breaches the contract, that’s a different matter.
If you haven’t provided the quality of work you promised, a client could pursue this as breach of contract or negligence. Either of these allegations can be made against you up to six years after the work was carried out - with some circumstances extending that limit.
What is retroactive cover?
Most professional indemnity insurance policies provide cover on what is called a 'claims made' basis - this means that the insurer will provide cover for all claims made by the policyholder irrespective of when the work was carried out. To ensure that a new insurer isn't picking up the exposure relating to years of work carried out previously when there may have been no cover in force, it is common to apply a retroactive date which excluded work undertaken prior to a specific date, which will often be the date that cover was first purchased.
Retroactive cover is where your insurance policy covers work you did in the past, even if you’ve since switched insurance companies. This applies to professional indemnity insurance, which involves a retroactive date. Simply put, this is the date since which you’ve had uninterrupted professional indemnity cover.
This means that if you’ve held ongoing professional indemnity insurance cover since your first contract, you’ll be covered for all of the work you’ve done. However, if you stopped having professional indemnity cover for a period of time, no matter how brief, you will only be covered for work carried out since the start of your most recent unbroken policy duration.
How does retroactive cover work?
If you’re unsure whether or not you’re covered for a particular contract, there is a simple way to tell. In order for your retroactive cover to take effect, both the work and the claim must have happened during the course of your ongoing professional indemnity cover. For example, if you’ve had ceaseless cover for the last 10 years, you can’t make a claim for a complaint brought up about work you did 11 years ago, even if the complaint only came in recently.
Similarly, you can’t claim for complaints made after the course of your insurance. If you have professional indemnity cover for three years and, four years later, a client complains about work you did during those three years, you can’t claim because you’re no longer covered by the insurance policy.
Is it a legal requirement for a builder to have insurance?
The types of insurance you’re legally required to have depends on the kind of builder you are. Generally speaking, you don’t need builders’ insurance if you’re working as an employee or a subcontractor, as it is your employer’s responsibility. However, you may benefit from your own policy if you’re going to be working unsupervised for a significant period of time.
If you run your own building company and you employ workers, you are legally required to take out employers’ liability insurance. This compensates for any injury or illness they experience as a result of working for you - and if you aren’t covered, you could risk a significant fine.
Additionally, you’ll likely benefit from public liability insurance. This protects you in the event a member of the public (including clients) is injured, killed, or has their property damaged as a direct result of your work. For example, if you or one of your employees dropped a hammer off a roof which then smashed someone’s windscreen.
If you’re working on a project for a bigger client, they may specify in your contract that you need to have certain insurance policies before you can begin the work.
Here at Markel Direct, we offer a builders insurance package. This allows you to combine a number of covers together into a single, specialised policy. You can find out more here.