The much-anticipated Phase 2 report of the Grenfell Inquiry has now been published, more than seven years after the tragic disaster on 14 June 2017. While Phase 1 of the inquiry examined the events of that fateful day, Phase 2 delves deeper into the circumstances that led to the incident and how it was allowed to happen. This report casts a critical light on the UK construction industry and its regulatory framework.
The report is extensive, and even the executive summary is lengthy. With an abundance of media coverage on the subject, my aim is to provide a concise summary of the inquiry findings and their implications for construction insurers.
Key findings
The inquiry revealed a construction industry where cost-saving measures often took precedence over safety. Employers frequently managed without a fire engineer on the design team, and design-and-build contractors replaced materials to achieve minimum compliance. Approved inspectors offered Building Regulations compliance influenced by their commercial relationships.
However, the inquiry uncovered more alarming practices. Material manufacturers were found to be deliberately manipulating testing processes and misrepresenting results to mislead the market. Certification bodies were complicit, driven by commercial interests. Construction professionals specifying and installing these materials were largely unaware of these deceptions.
The perfect storm
These issues occurred during a period of austerity, creating conditions for a perfect storm. The inquiry’s cross-examination of the architect involved in the Grenfell project highlighted widespread naiveté regarding fire safety in buildings.
Recommendations and future changes
The report’s recommendations are extensive and far-reaching. It will be up to the Government to decide if and how these will be implemented, a process that could take at least 18 months. Key updates to Part B of the Building Regulations (Fire Safety) are already scheduled, including:
- Sprinklers in care homes from March 2025
- Second staircases in buildings over 18m from September 2026
Future changes may include:
- Registration of fire engineers
- Accreditation for fire risk assessors
- Licensing for contractors working on High Risk Buildings
The definition of High Risk Buildings may shift to focus more on occupant vulnerability rather than building height. The stay-in-place strategy could be reviewed, as it relies heavily on the integrity of all other fire safety measures in the building.
Impact on insurers
The new Gateway regime set out by the Building Safety Act 2022 could impose tighter restrictions, with Fire Strategy reports becoming central to each stage. The Building Safety Regulator, despite a rocky start, may see increased responsibilities, potentially overseeing all construction activities beyond residential buildings.
New legislation has extended the limitation period retrospectively to 30 years for relevant claims. The Defective Premises Act 1972, along with the new Building Liability Order, is leading to increased litigation against associated companies. This “piercing the corporate veil” represents a radical departure from the norm.
The Technology and Construction Court (TCC) is inundated with claims, and the First Tier Tribunal is busy with applications to compel landlords to fix fire safety defects or developers to pay for them. This will lead to a cascade of recovery claims from the contractual list of professionals and contractors. With workmanship excluded, professional indemnity policyholders will be key targets.
Moving forward
Insurers face the challenge of pricing these potential new risks, with uncertainty making it difficult to quantify in the short to medium term. Coverage must be available at reasonable rates, or policyholders will struggle to operate. Closer collaboration between insurers and insureds, with suitable risk management practices, may be a solution. Guidelines for cover applied to Building Safety Fund works could serve as a model.
With extensive construction experience and frontline involvement in these claims, we will be engaging with insurers to address their specific concerns regarding underwriting and claims handling.
Under current instructions we are advising insurers on how their exposure could be reduced pursuant to remedies under the Building Safety Act. Also, how the new legislation may be of assistance when combined with subrogation rights.
