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Differences Structural Warranties Collateral Warranties
Negligence Provided that the defect constitutes a valid claim under the policy, Structural Warranties will pay out regardless of who’s at fault. Collateral Warranties require negligence of the liable third party to be proven in a court of law – this can often be a difficult, lengthy and very costly process.
Insolvency Under a Structural Warranty, insolvency is not an issue and the insurer will meet any rectification costs regardless of the responsible party’s solvency and ability to rectify the defect. In the scenario the liable party goes into forced or voluntary insolvency following practical completion, any rectification costs will need to be met by the owner.
Professional Indemnity Insurance Structural Warranties do not require Professional Indemnity insurance to be in place. If the structural defect is covered under the policy, the policy will respond. Adequate limits of Professional Indemnity (PI) insurance needs to be maintained. Not only is PI insurance invalid in the event of insolvency, cover will also seize if PI is not renewed.
Assignability Structural Warranties are fully assignable for an unlimited number of times throughout the lifetime of the policy. Generally Collateral Warranties restrict the owner’s ability to assign the warranty meaning that it will not automatically be transferred to the new owner.