The RAAC crisis — are there professional indemnity claims “bubbling” under?

Anyone who has seen the news or read a newspaper recently will now have heard of RAAC, if not its full name “Reinforced Autoclaved Aerated Concrete”. Commonly used in the construction of government and local authority buildings, this lightweight concrete material is aerated, or "bubbly", with a composition likened to an Aero chocolate bar. Many schools have been closed down for safety reasons with immediate effect with Department for Education (DfE) guidance issued recently regarding urgent steps and investigations to be taken by educational establishments.

At present, the focus has been on public buildings (schools, hospitals etc.) but there is a suggestion that any flat-roofed high-rise building built between the late '60s and the mid '90s could contain such material.

Who pays?

The Government will be paying initially for remedial works on public buildings although it is not clear how this will be structured, nor has there been any indication yet regarding the remediation of privately owned buildings. Could we see changes to the application of the Building Safety Fund (currently restricted to fire safety-related issues) to include this? Perhaps we will see the creation of a new government remediation committee and fund, specifically for the remediation of such problems – similar to the pyrite remediation scheme set up by government for the remediation of properties in Ireland damaged by pyrite.

Any paying parties will no doubt wish to consider the possibility of recovery from contractors and relevant construction professionals involved in any design and/or specification of RAAC.

Where could claims come from?

Where there is potential fault, the possibility of claims is likely to be explored, particularly as there appears to be a suggestion that issues were raised about this material many years ago. Engineers designing the structure, as well as contractors, might be in the firing line. Where designs were provided, it will be necessary to consider whether caveats were given, including about the expected life span of the RAAC panels/the need for maintenance etc. RAAC was less expensive than traditional concrete — and so it may be that RAAC had been used as a result of value engineering exercises without the provision of adequate warnings.

The web of possible recovery targets does not stop there, however, and it seems to us that it may be said that professionals involved at a later point in a building's history could also be implicated. For example, property managers responsible for such buildings could come under scrutiny if it transpires that poor maintenance has contributed to the damage or collapse. Building surveyors appointed to check the adequacy of buildings who have signed off buildings as safe may also be vulnerable where collapses have subsequently occurred or where that advice was incorrect.

For privately owned buildings, could surveyors and valuers also be targeted if a property is now worth less than its stated open market valuation as a result of such issues? This will depend on what a reasonably competent valuer or surveyor would have known about RAAC before the current publicity surrounding it. This will be the same test applied for other professionals too.

The guidance produced in August 2023 by the DfE (“Reinforced Autoclaved Aerated Concrete (RAAC): Identification Guidance”) refers to the fact that, in the 1990s, concerns had been raised by several bodies about structural deficiencies with a recognition that in-service performance was poor with “cracking, excessive displacement and durability” all being raised as concerns. Further alerts were provided in 2018 by the DfE and the Local Government Association (LGA) and in 2019 by The Standing Committee on Structural Safety (SCOSS).

Availability of potential targets and relevant information

Given the length of time that has elapsed since the materials were used (probably at least 30 years), many original designers and contractors may no longer be in existence. Professional indemnity policies operate on a “claims made” basis and it is unlikely that notifications will have been made historically so cover is unlikely to be in place where businesses are no longer trading.

Where such businesses do still exist and even where notifications to insurers are now made, it is unlikely that drawings and correspondence will be available and key witnesses may be retired or deceased.

Limitation periods

Claimants looking to pursue defective design claims going back that far will be hampered by the current limitation legislation with all primary limitation periods (six or 12 years from any breach of contract and six years from any cause if action in tort) long expired. Even claims based on later “relevant knowledge” of such issues (three years from the date of such knowledge) are subject to a long stop of 15 years from the date of any alleged breach of contract.

Where, however, the affected buildings are used as a “dwelling” (which could include privately owned and social housing, for example) and pose a risk to the occupants, this may well fall for consideration under the Building Safety Act 2022 which prescribes a retroactive limitation period of up to 30 years for pursuing claims against those persons or entities who took on work in connection with that dwelling.

Where such buildings have been designed and constructed towards the end of the period when RAAC was in vogue (for example in the mid’90s), claims may still be possible but the majority of design claims will be time-barred, unless the legislation is retrospectively amended as it was in the light of the Grenfell Tower tragedy. Claims against professionals involved at a later stage may also not be time-barred.

Considerations for insurers

Professional indemnity insurers can expect current policyholders in certain professions to consider making block notifications where they can identify involvement in projects involving RAAC which could fall within time. That may well open up a number of policy coverage considerations and retroactive dates may well apply. Policyholders making notifications should be asked to preserve documents where they are still available (although as above, this may be problematic). Insurers will invariably want to carefully consider (and possibly challenge) the validity and scope of such notifications, and — against the backdrop of concerns dating back to the 1990s — prior awareness and fair presentation will require some unpicking.

Looking ahead, insurers may also want to consider including questions around RAAC in their proposal forms and policy exclusions for RAAC may well be introduced as they were for fire safety and cladding-related claims.

What next?

The construction industry is in the news yet again, with many people adversely affected and many millions of pounds likely to be spent rectifying the issues. Because of the timing of the design and construction of RAAC, however, the impact on professional indemnity insurers is likely to be significantly less than that experienced in relation to fire safety issues, although claims may still be possible, including against professionals involved later in the history of a building.