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Building Safety Act 2022 – Coverage considerations

The Building Safety Act 2022 is undoubtedly one of the most assertive reforms to building safety law implementation in the UK.
Newly built homes in a residential estate

The Building Safety Act 2022 is undoubtedly one of the most assertive reforms to building safety law implementation in the UK. The Act has made significant changes to both the law and practice within the construction and property industry, with potential implications to a variety of parties as a result.

Passed in June 2022, the Act intends to improve the safety of developments during and after the construction process − which is welcomed by the insurance industry. However, consequently, the introduction of the Act also creates insurance issues.

Following the Grenfell fire tragedy, the ‘Building a Safer Future’ report – produced as a result of the Dame Judith Hackitt review – led to creation of the Act. It is intended to instil industry-wide cultural change as new roles and responsibilities have been devised for those procuring, designing, constructing, and managing high-rise buildings. Below we outline three changes implemented by the Act and the associated insurance issues which need to be considered.

Limitation periods

Limitation periods under the Defective Premises Act 1972 and the Building Act 1984 have been increased from six to 30 years for projects completed before 28 June 2022 and to 15 years for projects completed after that date. This increases exposure for insurers and insureds as a result − particularly in respect of claims which they had considered were time-barred. Consequently, a civil action brought under the Act would override any existing contractual agreement in place regarding limitation periods.

Potential liability can be faced by insureds and insurers for long periods of time. Additionally, the practical challenges of the extended limitation period include the additional burden of document retention over such a long period, the availability of witnesses, and their ability to recollect key events and exchanges in the distant past. Unsurprisingly, many firms will have failed to archive projects beyond the six-year limitation period, believing such claims would now be time barred. However, with the new limitation period being applied retrospectively, it could result in actions being brought against a property or construction professional with a defence heavily impacted by the loss of such files.

While the full effect of the Act is still being assessed, insurers are analysing their potential changing liabilities as a result of the Act. Going forward, insurers may expect professionals to retain documents for at least 30 years for projects completed prior to 28 June 2022, and at least 15 years for projects completed after that date.

Occupied Buildings

The management of building safety risks in occupied higher-risk buildings − primarily relating to the spread of fire and structural failure − is covered in Part 4 of the Act. The statutory responsibility for managing these risks falls to the “accountable persons” (AP) and/or the “principal accountable person” (PAP). Figuring out who is the AP/PAP for a building is not straightforward. In an occupied building where an owner has delegated the repair of common parts, the AP/PAP could be the individual, partnership, or organisation who has been given those responsibilities. It would therefore be prudent for all property managers with responsibilities in an occupied building to invest time and resource into assessing whether they are an AP/PAP.

Where a property manager is assessed not to be an AP/PAP, it is likely that owners/landlords will expect support from them in meeting new obligations under the Act. These may include the following tasks and roles:

  • Identifying, assessing, and managing the structural and fire safety of the building.
  • Maintaining relevant information about the building.
  • Ensuring residents have access to comprehensive information about fire safety in their building.
  • Reporting to the newly formed Building Safety Regulator, as required.

The AP/PAP will remain legally responsible for the duties being carried out. However, property managers should be mindful of the extent of these additional duties and any potential liabilities when considering the scope of their PI insurance cover. Over the last few years, PI insurers have continued to focus on cladding and fire safety. They have often limited the cover available for high-rise buildings and introduced a broad range of exclusions to limit their exposure to fire safety risks. Therefore, property managers should check the scope of cover in their PI policies before taking on additional duties in relation to the obligations of AP/PAPs under the Act.

A new regulator

As referred to above, the Act also introduces a new regulator, the Building Safety Regulator. The regulator is responsible for regulating high-rise buildings i.e. those with seven or more storeys or that are 18m or higher, and have at least two residential units. Hospitals and care homes will also fall under this remit while under construction.

The regulator will oversee the safety and standards of buildings while driving up standards. Additionally, the regulator will have enforcement powers to hold building control professionals to account for non-compliance with the Act. For example, failure by an AP/PAP to adhere to their prescribed duties under the Act could lead to sanctions, including enforcement notices, an order for a special measures manager to take over their duties, and even criminal prosecution − potentially resulting in a fine or imprisonment. While PI policies can provide cover for regulatory and criminal investigations and prosecutions, these may only be available as an extension of cover, as opposed to core cover, and may only trigger if the defence will mitigate future civil claims. Resulting fines and penalties will not be covered. Any professional acting within the scope of the Act should therefore be mindful of the scope of their policy and speak to their broker to ensure that they have sufficient cover for the liabilities – new and old – they may now be exposed to.

If you have any questions about the Buildings Safety Act, or would like to know more, please contact your Marsh adviser.

Meet the authors

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Sarah Coutts

Specialist in claims handling, Complex Claims and Disputes Team

  • United Kingdom

Andrew Broome

Andrew Broome

Technical Specialist, Marsh Specialty