Construction Insurance Insights: Is RAAC the next professional indemnity crisis?
by Trevor McClintock,
Construction Insurance Specialist, ABL Group
Recently there has been considerable news coverage relating to the use of Reinforced Autoclaved Aerated Concrete, commonly referred to as RAAC and many in the construction industry are rightly concerned about the impact this may have on their businesses and particularly on their insurance renewals.
What is RAAC?
This material has been used throughout the UK in the construction of schools and other Public buildings since the 1960s. The private sector has not been spared from its use either. This lightweight concrete material is aerated, with the analogy being drawn to a Wispa chocolate bar as compared with Dairy Milk representing traditional concrete!
Why is RAAC a problem?
RAAC has been found to be less durable than traditional concrete and there have been problems as a result, which could have significant safety consequences for buildings constructed using this material.
Research has shown that RAAC has a far lower structural loading capacity than other generic reinforced concrete products. Its condition also deteriorates further if water is present, and this can compromise the reinforcement bars contained within RAAC planks.
Headlines have focussed on some schools that have been closed down or partially closed for safety reasons. The GB Department for Education has recently issued guidance to affected schools, urging steps to be taken as a matter of urgency.
The Government has committed to paying initially for remedial works on public buildings in GB - although how this will play out in NI remains to be seen.
Will the use of RAAC come back to haunt your construction business?
Inevitably, there will be consideration given to seeking recovery from contractors and construction professionals involved in the design of affected buildings or professionals specifying the use of RAAC in buildings.
Since concerns appear to have been raised around this material some years ago, it is all the more likely that questions will be asked of Construction Professionals such as;
- Were end users made aware of the use of RAAC in their project?
- Were end users adequately informed of RAACs life span?
- Was sufficient direction given in relation to its upkeep?
With regard to seeking indemnity from the Construction Industry, there is an added complication arising from the length of time that has elapsed since RAAC was specified and used – potentially over 30 years. Hence many of the Professionals or construction firms at that time may have ceased trading.
Aside from this, the current limitation legislation with all primary limitation periods (six or 12 years from any breach of contract and six years from any cause under tort) will have long expired.
Is RAAC another major crisis for the construction industry?
We believe a number of insurers operating in the construction market are currently assessing their view of the potential exposures associated with the use of this material and what, if any, information they require to satisfy themselves regarding such exposure.
Contractors and Construction professionals can expect supplementary questions to attach to their normal annual declaration return and should review project specifications over the affected period well in advance. Starting this process now will give you enough time to have this information to hand, should your insurer make an enquiry.
Policy exclusions for RAAC could well be introduced, as they have been for fire safety and cladding claims.
In view of the timescales involved since specification and construction using RAAC, the impact on the professional indemnity market is unlikely to be as severe as the cladding/fire safety crisis of recent years.
However, firms that are aware of their use of this material in past projects should prepare their documentation well ahead of their next insurance renewal and as ever, talk to a specialist construction insurance broker for further impartial and confidential advice.
For further advice please call our specialist construction insurance team on T: 028 9099 3600