Most property owners rely on contractors to carry out work on their buildings and land, but if they cause damage, who picks up the bill?

You’d probably assume the contractor. After all, if you’ve appointed an independent business to carry out work and it acts negligently, surely the responsibility and any resulting financial liability must sit with them? Unfortunately, that’s not always the case. There are certain situations where property owners can find themselves liable for damage, even when it’s been caused by contractors working on their behalf; fire is one such example.

The law governing damage caused by fire is covered by special rules dating back hundreds of years, to a time when there was little or no fire insurance available to property owners. Historically, the law imposed strict liability on property owners where fire escaped from a property and caused damage elsewhere. This rule was subsequently modified by legislation in 1786, which provided that a neighbouring owner could not bring a claim against a property owner where a fire had “accidentally” begun on their land. The important word here is “accidentally”.

If a contractor deliberately starts a fire as part of work they have been employed to undertake and that fire subsequently spreads because of their negligence, the position can be very different.

The Court of Appeal considered this issue in 1971, when Lord Denning concluded that an occupier of a property could be liable for the escape of fire caused by the negligence not only of their employees, but also independent contractors, guests and others on the property with their permission.

That judgment remains the law today and creates a potentially significant and often overlooked risk for property owners.

The consequences of this can be significant, as demonstrated by a recent matter involving a property owner whose contractors caused a fire while carrying out routine maintenance work. The contractors had been employed to clear ivy and other foliage growing on a boundary wall and used petrol to set fire to it. The fire subsequently spread to an adjoining property, causing significant damage and resulting in a substantial claim.

Unfortunately, the contractor was a very small business and didn’t have insurance in place to cover the damage. What compounded the problem even further was that neither did the property owner, who, due to an oversight, had not renewed their insurance and found themselves liable for the damage.

This case highlights two very important issues for anyone who owns or manages property.

The first is contractor due diligence. Property owners shouldn’t just assume that contractors have adequate insurance and should request evidence of cover before work begins. They also need to check it thoroughly, making sure that both the type and level of insurance held are appropriate.

The second issue is that property owners must ensure their own insurance is up to date. That may sound obvious, but for investors and businesses managing multiple properties, it can be difficult to keep track, so a system to ensure policies are renewed on time and regularly reviewed to ensure that the level of cover is appropriate is vital.

The key takeaway is to never assume that risk is automatically transferred to contractors and to ensure your own insurance arrangements remain up to date.

For advice on contractor liability, property disputes or managing risk across your property portfolio, we’re here to help. Get in touch with our dispute resolution partner, James Staton.