LIFTS PAul roberTson uncovers the background to engineering insurance and explains why your block needs it


Thehidden secrets of engineeringCover


historically lift insurance was sold to exploit the tax advantages


public.Itisanareathatfew appear to fully understandand Ibelieve alot of badadviceis given as a result. Historicallyengineering insurancewas sold


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to exploitthe taxadvantages.Whilestatutory engineering inspections were subject to VAT, insuranceproductswerenot.Soifaninsurer combined the inspection service with asmall elementofinsurance coverthe VATcould be avoided. This loophole has long been closed but ultimately it gave insurers a significant advantage formanyyearswhichisprobably whytheystill have suchamarketshare in statutory inspections. Thesecond waythatitcould be argued


insurers have exploiteddirty tactics, is that they normallyonlyofferthe additional insurancecover if they arrangethe statutory inspection.Bynotmaking this covereasily availableonastand-alone basistheyhave successfully giventhemselvesacommercial advantage. In addition,many insurers andbrokers


have done little to helpmatters by treating engineering cover as a policy extension, leaving somepolicyholders to consider it as an optional extrawithout realising thelegal requirement for statutory inspection (See Flat Living issue 14 for more on this). Having said all that, there remains a strong


argument forinsurerstoremain involved in providingstatutory inspections. Thestatutory requirementisthatplant is inspectedon aperiodicbasis by an independentand competentqualifiedperson. Thepurpose of


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ArguAbly InsurAnce companies have a lot to answer for in the way that so called “engineering insurance” has been sold to the


this is to prevent anyconflict of interest and ensure safety is always putahead of other financial considerations. To understandhow this mightworklet’s


usethe example of aphenomenon sometimes referred to as “cat flapping”. This iswherea lift door is leantuponand thesecuringpins at the bottombreak, causing it to swing open like a cat flap. Lift doors are normally suspendedfrom atop rail with securing pins on the bottomto ensure they remain in atrack -verysimilar in designtosliding


Statutoryinspections shouldbeconductedby anindependent,suitably qualifiedperson


wardrobe doors. Nowimagine asituation wherethe liftmaintenancecompany is a on afixedprice contract.There couldbea danger that forfinancialreasons they do not immediatelyreplace apartsuchasthe worn guide pins on the bottomof a lift door. The outcome could be someone falling downa lift shaft andthisisexactlywhythe legislation requires regular, independentinspections. In case you are wondering, this can actually happen so don’teverleanonaliftdoorwhile waiting for the lift as you could end up falling downthe shaft! So thereisverygood reason forthe


inspection to be independentand insurers are ideally placed to provide this service along


with anyofthe otherspecialist providersof statutoryinspections.Whomyoumay choose to useisyourchoicebut youshouldensure they are independent and therefore impartial. However, the fact remains that to select


insurance coverfor plantisoptional(as ever subject to interpretation of your lease covenants).Acommonexample of aclaim underthiscover wouldbethe example of a broken downliftwherebythe lift doorsare forced open to evacuate thepassengers. The block policy will normally not indemnify againstany harm caused becausethe event that ledtothe damage occurring wasthe breakdownof thelift(referred to as proximate causeininsurance speak.)The engineering policy should respond to this eventby providingcover forsuddenand unforeseen damage.Thisisone of themost common claimswesee forlifts andisagood example why this cover should be purchased. Sowhen consideringwhether to tick the


‘engineering cover’ boxonyourrenewal form, three important things to remember are that: n Statutory inspection of items such as lifts, communal boilers and window cleaning cradles is not an insurance option but a statutory requirement. n Your statutory inspections should be conductedbyanindependent,suitably qualifiedperson. n If your lease permits, then electing for the optional insurancecovermaybeaprudent buying decision.●


PaulrobertsonManagingDirector MidwayInsuranceServicesLtd&1stSureLtd Tel 08453702848 Fax08453702849 Webwww.1stsure.com


Issue 16 Flat Living


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Cutoutandkeep


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