DUBAI // Owners of high-rise homes in Dubai have been urged to examine their building insurance policies before an expected barrage of litigation over the New Year’s Eve fire at The Address Downtown.
As a result of the fire, authorities ordered checks on every building, amid suggestions that the aluminium composite panels that clad hundreds of towers are a fire risk.
Even minor remedial fire-prevention work on aluminium-clad buildings would be expensive: the cost of replacing the cladding could be ruinous.
Lawyers now predict a scramble among building owners, developers, construction contractors, designers and material manufacturers to avoid liability, with insurers eventually footing the bill.
“All interim owners’ associations need to dust off their insurance coverage and have a good look at it,” said Michael Lunjevich, a partner at the law firm Hadef & Partners.
“Owners may not be aware of the insurance put in place for their building. There could be gaps that might allow insurers to dodge liability. Is this caused by faulty design, faulty materials, faulty installation or a structural defect? Each possibility has a different treatment under insurance, and should be investigated.
“If this issue is as big as people suspect, then everyone needs to pull out their contracts, whether that be the sale and purchase agreement, the construction contract or insurance contracts, and take legal advice.”
The legal fallout from the Address fire also illustrated the need for more clarity over the liability of building owners, and lawyers said more legislation may be required to settle the issue.
A law for jointly-owned properties in Dubai was enacted in 2007, creating freehold property rights for expatriates and requiring owners’ associations to manage the maintenance and operation of their buildings.
However, the associations have not yet been fully recognised as legal entities. They remain “interim” bodies, which limits their ability to start legal proceedings or take collective action.
“Both Rera and Land Department need to act to bring the Jointly-Owned Property Law into full effect,” said Mr Lunjevich.
“Also, Dubai Municipality and civil defence need to act on projects under construction to ensure that if there is an issue this is not repeated.”
Insurers are also considering the implications of the Address fire for underwriting risk for high-rise buildings.
Global insurance groups have taken a keen interest in building facade blazes after high-profile fires in Europe, the US and Asia in recent years. Groups such as Liberty Mutual, FM Global and Tokio Marine have funded research into facade fires.
Unlike many other cities, where panel-clad buildings may constitute only a small part of the building stock, most of Dubai’s high-rise skyline was constructed in the decade before the 2008-2009 financial crisis, using this type of facade. Many of these buildings have aluminium cladding with flammable material in its core.
Beyond the claims generated by the Address fire, insurers and reinsurers will now also be analysing the costs associated with the fire tests that will be conducted on buildings across the city, any remedial work that may be required as a result, and the retention of lawyers to advise owners’ associations.
“We have received some claims notifications and are analysing the situation,” said a spokesman for Zurich Insurance Group. “It’s way too early to make any statements on the role of the cladding in this incident.”
In the meantime, lawyers expected the fire to result in litigation. “Insurers will probably bear the brunt if the insurance coverage is in place. A unit owner may sue a developer, who in turn sues the construction contractor, who sues the designer, who sues the material manufacturer and they all call on their insurers to pay up if they are found liable,” said Mr Lunjevich.
“Developers, consultants, contractors, manufacturers and insurers will all play a part in this. This is not a standard building fire – here we are talking about a fire that has highlighted problems with materials, and lots of it is possibly still in the market.”
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