"What are the Pitfalls and Remedies to ensure a proper settlement" ? - Continued

During this period of on site inactivity the Design Team are preparing drawings and Bills of Quantities required to obtain competitive tenders.  The Design Team normally comprise of firms of Architects, Quantity Surveyors, Structural Engineers and Planning Supervisors.  Again it is important for the Insured to select a group of professionals that are well versed in dealing with the almost unique problems involved in reinstating a castle.  Despite the high degree of experience your Design Team should have the production of drawings that will satisfy both the Building Control officer and the Planning Authorities which will take longer than when dealing with more contemporary buildings. 

The reinstatement of the building should be carried out to comply with current Building Regulations whilst at the same time satisfying the Planning Authorities that the unique character provided by the building prior to the loss will be recreated.  Effectively the agencies are trying to recreate a property possibly originally built in the 17th Century that complies with regulations of the 20th Century.

This can be a lengthy process and in some instances ends up with compromises made between the two agencies.  Certain Building Regulations may be relaxed and some requests from the Planners may be dropped.  For example, a castle will have to comply with all the heat insulation requirements and fire regulations.  Often the type of construction is more than adequate to deal with some of these requirements, however problems do surface particularly if fire regulations have to be recognised.  The longer this process takes the more temporary shoring and protection costs as well as alternative accommodation costs will be incurred.  These costs should be reflected in the sum insured.

At this stage of the project the Insured may wish to incorporate changes to the castle.  This can cause complications with the agencies and the costs, both direct and indirect, will not be met by the Insurer, as it will be considered as betterment.

After the tenders are received from a carefully selected group of contractors the lowest tender is usually accepted and approved by the Loss Adjuster.  Prior to this the Loss Adjuster is given the opportunity to approve the extent of repairs specified by the Design Team.  It is important to realise that, as most castle owners have discussed, sometimes some drawing details prove impossible to implement in practice.  Therefore it should be anticipated that alterations to the specification drawn out at the start of the project will occur and to avoid frustrating arguments when settling the claim at the end of the project the Loss Adjuster should be given the opportunity to approve the alterations as and when they occur.

Although not required to by the policy the Insurers tend to make interim payments as and when interim valuations are produced.  Clarification on the Value Added Tax status of the Insured can be a complex procedure.  Generally construction works associated with the repair and reinstatement of the damage attracts VAT which if not recoverable from HM Custom and Excise should be paid for by the Insurer.  Consequently, the sum insured should include for the VAT element.  If the amount of VAT is recoverable from HM Custom and Excise the Insurers avoid paying for this cost and the Insured can recover the VAT when the normal returns are forwarded.  If the Insured is not used to coping with a large monthly VAT bill it may result in cash flow problems.  Discussions should take place with HM Custom and Excise as early as possible to try and reach a solution that will avoid cash flow problems.

Insurance claims involving castles can be very complicated and lengthy to deal with for the above reasons.  There are, however, a growing number of specialist firms of professionals and building contractors that specialise in this work, which eases the pain.  However, it is crucial that your insurance arrangements recognise the problems at the outset to be sure of a satisfactory conclusion to your claim.

HSBC Insurance Brokers Ltd.  Caledonian House, 10 Buchanan Street, Glasgow, G1 3LB.
Member HSBC Group   Tel: 0141-531-1900   Fax:0141-531-1919