Agreed conduct: Insuring the uninsurable

It used to be that tall developments posed too many risks for property insurers to bear. By their very nature, they’d cause too many right of light injuries to neighbouring buildings, leaving them open to legal disputes. The higher the development, the greater the chance, or chances, of receiving a claim.

But it couldn’t just be that these risks were left uninsured. It would’ve meant major sites across the UK never getting off the ground and the innovation in the property development sector never really fulfilling its potential.

Over a decade ago, CLS Risk Solutions came up with a proactive method to handle these disputes and make these developments more achievable.

The major stumbling block standing in the way was the adversarial nature of a claim and the way developers chose to approach them. A case in 2010 – HKRUK II vs Heaney – was a perfect example of a developer getting it all wrong, paving the way for a much-needed shift in the industry.

Marcus Heaney successfully forced an injunction on HKRUK II to tear down a two-storey extension of an office block in Leeds, even though the right of light injury to Mr Heaney was relatively small.

The courts ultimately ruled in his favour because of the developer’s behaviour throughout. HKRUK II pushed on with construction without any regard for infringing on people’s rights, wrongly assuming they could force through a settlement if it ever came to an injunction.

However, the damage was already irreparable. The way HKRUK II conducted themselves in the initial phases of the project meant any compensation package fell on deaf ears and the building was wiped from existence.

But what if developers approached claimants with compensation earlier? What if they accepted their projects were inevitably going to cause right of light damages and proactively looked to collaborate with neighbours and agree a fair deal?

CLS Risk Solutions went about creating a concept in their Rights of Light policy that did just that. It’s called ‘Agreed Conduct’ and has now become standard practice across the market.

And ‘conduct’ is the key word – it encourages developers to go out into the community and act the right way. Surveyors use a methodology that quantifies right of light damages into a financial figure, so developers can then propose fair compensation to anyone affected.

CLS Risk Solutions will collaborate with the insured and their advisors throughout the negotiations and offer as much or as little guidance as they need. The team have been working on agreed conduct for over a decade now and act as a valuable resource for the insured to call on for support.

And while negotiations take place, the development can still continue. Even if disputes are still live, the policy will absorb risks for as long as it needs to. It allows developers to secure or release funding on the project and avoid making any alterations to construction.

The policy protects the balance sheet too. Before, funders and developers of these projects were in no man’s land as to how much delays, abortive costs, and legal procedures would eventually cost them. Now, as long as they know they can cover the cost of the deductible amount, the policy will take care of the rest.

So Agreed Conduct took what used to be a very confrontational process and turned it into a cooperative discussion that’s much more considerate of everyone involved. It means more developments are now being built and more people affected by these buildings come away satisfied.