The current challenging market conditions have led to insurers taking extra steps to validate claims. 

Insurers have been asking questions and seeking information that may not have been required previously.

Attention to detail, a key factor in all insurance transactions, becomes more important than ever. Remember these important actions:

• Understand requirements and responsibilities under a lease are fully understood.
• Convey requirements to insurers in clear, unambiguous terms.
• Check quotations and policy documents carefully to ensure terms match cover requirements. 

Lease conditions

• Leasehold property policies will typically cover: ‘common parts of the structure in which the individual housing unit is situated but only to the extent of the leaseholder’s interest as defined in the original lease.’
• The starting point to determine precise insurance responsibilities must be the actual lease conditions.
• Lease terminology can be confusing, and different lease versions can often apply across the same organisation. 
• Terms can also be specific or silent. It is important to note that if, for example, the leaseholders demised area is defined for insurance purposes but does not include common parts, the lease is not silent on the issue. 
• Interpreting leases can be tricky, so obtain a legal view if responsibilities aren't obvious.
• Sample lease terms within tenders can help prevent subsequent problems with insurers. 
• If the intention is to cover common parts for which the council retains responsibility, these need to be mentioned specifically. This can be either via a separate policy item, or by amending standard wording (as quoted above).

Considerations 

• Sums insured – have estimated reinstatement values been adjusted to include all common parts? Average may apply if significant under-insurance is identified.
• Apportionment of common part values – is this based on floor area or simply on the number of units in the block?
• Property disposals – does the council retain any residual common parts responsibility, even when all flats within a block are sold?
• Policy excess – is it applied by loss event or as a separate excess for each individual leaseholder?
• Maintenance and repair – areas of landlord and leaseholder responsibility will not necessarily mirror insurance responsibilities. Losses that should have been insured by the landlord, will not be recoverable from leaseholders as a maintenance expense.
• Claims reporting – can policy notification conditions be met? For example, a ground floor flat leaseholder may not be immediately aware of a problem in a roof space.

None of these issues are insurmountable and time invested in fully understanding and explaining requirements should prevent problems in the event of claim.

Deke Adams (deke.adams@marsh.com) is Development Executive at Marsh.