The Right to Light market has tightened considerably in the last six months with insurers taking an increasingly cautious approach when offering terms, resulting in higher premium and excess combinations.
Rights to light affecting neighbouring property owners ought to be considered from the earliest stage possible and should be high on the agenda for developers when considering any new project, as infringement of these rights could potentially lead to significant penalties and disruption.
Case law in preceding years acknowledges that, whilst an injunction should generally not be awarded where financial damages would be an adequate remedy, the reality is that in many rights to light scenarios, an injunction will be required to protect a beneficiary’s rights. This is more often the case where a developer’s conduct (particularly when dealing with potential beneficiaries) is called into question. The courts are therefore able to insist an existing development is demolished, where there is an infringement of rights to light.
Due to the possible catastrophic consequences of a neighbouring property owner’s claim (or multiple claims) being successful, rights to light is increasingly and justly finding itself firmly on developers’ risk management strategies.
Why Is the Right to Light Market Tightening?
With property owners becoming more knowledgeable about rights to light, compounded by several high-profile cases in the press, the number and severity of claims is increasing. Insurers are seeing a marked increase in the severity of claims. One insurer has reported a five-fold increase in major claims each year.
With the increase in claims frequency and severity, we are also witnessing an increase in premiums and deductibles across our insurer panel. It is not uncommon for premiums to be over 30% higher in 2022 than we have experienced in previous years.
Perhaps more concerning is the rise in claims companies purporting to act on a “no win, no fee” basis. We are seeing these approaches from both law firms and surveyors. Generally, they operate by identifying large developments on local authority planning portals and writing to large numbers of properties in the surrounding area, offering to act on their behalf and only be remunerated if their claim is successful.
The resultant impact? Insurers are seeing increasing numbers of claims and in some instances, developers are having to manage these approaches before they’ve been able to secure Right to Light insurance. Whilst many of these claims have no grounding, this changing market trend has forced insurers to re-assess their strategy and approach to underwriting.
Other Factors Influencing Increased Premiums
Whilst the rise in claims has inevitably led to increases in premiums, there are other factors influencing the shift in approach by insurers. One of which is due to claimants using developers’ profits as the starting point methodology rather than as a leverage point within claims negotiations. Where surveyors may have suggested that five times the book value limit is sufficient, we have seen the starting point for settlements being much higher and sometimes in excess of deductibles and usual surveyor assessments.
Another consideration could be that businesses that have suffered losses elsewhere as a result of the COVID-19 pandemic may be considering right to light claims as a way of generating other income.
With claimants now seemingly armed with better advice and with matters becoming more litigious, some insurers are seeking additional information upfront, including anticipated developers’ profits and cutback information, to prepare for the worst-case scenario.
The Way Forward
Right to light risks are best addressed in the very early stages of a development. Engaging with a specialist insurance broker early on will ensure you are provided with comprehensive cover to mitigate these risks, thus enabling you to save time and money further down the line.
We have direct access to the decision makers in a wide range of markets to ensure we tailor bespoke cover for your development needs.
We have always been proactive in our approach to collating underwriting information on your behalf, however, we have also recently invested in cutting edge technology that enables us to provide additional, high quality information to insurers in order to be more efficient and collaborative when dealing with your risk.
Can We Help?
Our experienced and legally qualified Legal Indemnities team is one of the leading specialist brokers for legal indemnity solutions. If you have any questions, please contact Sarah Jones on 02920 858602 or at sarah.jones@thomas-carroll.co.uk.
