Changes in the Building Safety Act and Insurance implications



In reviewing the changes that are being implemented, Gallagher have established where some of the changes and new ways of working may affect the contractual piece or the insurances and in many cases, both.

Whilst this is not exhaustive, these are the areas that Gallagher have established in the first instance and expect that will develop in the future as the construction and insurance industries work through this together.

Gateway 2 – The Pre-Construction Phase

This should be a benign part of the process, but the implications of making errors here could cause issues further down the line.

If the Building Safety Regulator (BSR) doesn’t provide sign off, due to errors in the design, delays can occur due to re-work in order to re-submit.

This delay could impact any lenders involved in the project, as well as the cost and time implications of realigning any key trades to enable the start of the works. If the Principal Designer (which can also be the Main Contractor) is at fault, then they will need to consider if and to what extent their professional indemnity policy may be able to respond (in particular any pre-completion mitigation of loss cover), and what contractual protection they should look to include.

Alternatively, if the delay in sign off is via the BSR it may still have a similar impact on the project and funders. Parties should be careful how the responsibility for a delayed sign off, especially if it is outside of their control, is dealt with under the contract, would this constitute a change event under the contract? Or should it?

Gateway 3 – Completion

The application process for this should occur at or just before practical completion, and the final sign off can’t be granted until practical completion has been achieved.

There will potentially be a disconnect between the insurances and the risk allocation at this point. Under a standard contract, at practical completion the requirement for the contractor to be at risk falls away and the employer is now responsible, however the building cannot be ‘taken into use’ until sign off has been provided. Therefore earlier discussions with both Works insurers and property insurers need to be undertaken to make sure that there is a clear allocation and the building is appropriately insured before it has achieved BSR sign off and taken into use (i.e. a transfer from works to property).

This should also include any business interruption type covers. As an alternative the application of any DSU policy needs to have this consideration at inception rather than at the end of the project period – i.e. how are loss of profits / revenue type risks to be protected during the period awaiting sign off should an incident occur (such as a storm or fire) and has the intended commercial operational date generally been appropriately adapted to cater for BSR-related delays?

Also, in the event that sign off is delayed either through BSR or due to non-compliance, how are any LAD’s to be calculated, or will this be added to an extension of time type protection?

It is expected that the definition of completion under contracts may be changed to take into account the period of awaiting sign off by the BSR, which needs to be treated very carefully due to the time it could take.

Ideally, if the property insurances can be sourced in advance of the project commencing then this could take the risk between practical completion and BSR sign off.

It is unknown at this stage what happens if the BSR doesn’t grant a certificate due to issues with the project. Depending on the issues, it may need additional works and an extension to the insurances, or in the worst case scenario, it may require complete demolition. Of course, protections from a professional error caused by the principal designer should be in place through their Professional Indemnity insurances, subject to the normal terms and conditions of those insurances.


The changes arising from the Act will undoubtedly have a far-reaching impact on the construction industry. Contractors must invest in upskilling their workforce to meet the new competency requirements and adapt their recruitment processes accordingly. They may also need to allocate additional resources to improve safety management systems, digitise record-keeping processes, and implement more robust quality control measures.

The changes represent a significant shift in the construction industry’s safety landscape. Contractors must recognise the increased responsibilities and obligations placed upon them to ensure the safety of all building work. By embracing the new requirements, and working together with all relevant parties including the BSR, they can contribute towards a safer built environment for the future.

A full review of company standard contractual documents and relevant insurances needs to be undertaken, especially when considering pre-completion mitigation of loss cover and post-completion mitigation of loss cover under a professional indemnity policy, which aren’t covers fully enjoyed by all.

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