Bubble trouble: aerated concrete claims and coverage
By Amy Lacey
Amy Lacey sheds light on the impact of the recent scandal involving reinforced autoclaved aerated concrete in the context of possible legal and insurance claims
Reinforced autoclaved aerated concrete (RAAC) is a lightweight cementitious material pioneered in Sweden and used extensively in public buildings in the UK from the 1950s to 1990s. Mixed without aggregate, RAAC is ‘bubbly’ in texture and much less durable than standard concrete, with an estimated lifespan of around 30 years. Its porous nature can allow water ingress, causing decay to steel reinforcements, and structural instability.
The unexpected collapse over the summer of an RAAC beam, in a school building previously considered low risk, led to all schools identified as using this material being closed or partially vacated. Over 150 schools have been deemed potentially dangerous, highlighting long-term under investment in maintenance and repairs. Incidents have also been reported at courts, hospitals and shopping centres. Recent guidance for schools, local authorities and building professionals recommends urgent steps to identify RAAC, and restricted access in the vicinity until mitigation measures can be put in place.
RAAC was principally used in flat roofing, walls and floors of buildings in public ownership, though many buildings in the private sector could also be affected, including residential property, offices, retail premises, warehouses and hotels.
What should be done where RAAC is detected?
The Health and Safety Executive warned that RAAC may be liable to collapse with little or no warning, posing significant risks of injury. Employers must take reasonable steps to ensure the safety of employees, pursuant to the Health and Safety at Work Act 1974 (HWSA), and visitors to premises are owed a similar duty by occupiers with control of premises, under the Occupier’s Liability Act 1957. Responsible landlords (and tenants) should investigate swiftly and arrange for detailed condition surveys to be undertaken, in relevant locations.
Ageing RAAC panels are prone to deflection, cracking and excessive displacement, and may need propping or additional reinforcements. Flat roofing is especially vulnerable from pooling rainwater above. RAAC is often coated with other materials, including asbestos in some cases, and invasive testing should be undertaken by appropriately qualified professionals. Building surveyors and structural engineers will be in demand for specialist advice to help manage operational risks.
Who pays for remedial work?
The government will be paying initially for remedial works to public buildings, though precise details are yet to be confirmed. Funding has been announced for the replacement of some RAAC-constructed hospitals.
Landlords are usually responsible for the costs to repair and maintain the structure of privately owned buildings in multiple occupation, while the position may be different for buildings let on a standalone basis. Even where landlords are confident that tenants are under repairing obligations for parts of premises where RAAC is identified, they could still be at risk of statutory liability under the HWSA and/or Defective Premises Act 1972 (DPA), if appropriate steps are not taken to avoid foreseeable injury.
Various other lease provisions may apply in dealing with RAAC issues, including rights of access to inspect and carry out remedial works, ability to assign or underlet premises, and rent review valuation terms. The presence of RAAC usually would not constitute a breach of terms in the lease unless its condition amounts to or causes disrepair.
Will claims be made against construction professionals?
Designers responsible for RAAC in buildings may be criticised, if insufficient warnings were given about the expected lifespan, and RAAC might be described as an inherently risky material oversold by manufacturers. Nevertheless, potential claimants have significant hurdles to overcome. Potential recoveries are further complicated by original contracting parties no longer existing in many cases, and difficulties establishing documentary or witness evidence.
The widespread use of RAAC ended in the 1990s and contractual claims arising from the initial specification are likely to have expired. Claims in tort could provide an avenue for redress where damage occurs, including resultant damage to other parts of a building, based on the accrual of the cause of action at the date of loss (URS Corporation Ltd v BDW Trading Ltd  EWCA Civ 772).
The new 30-year retrospective period for DPA claims introduced by the Building Safety Act 2022 (BSA) might allow statutory claims against construction professionals involved in residential development. The DPA requires those taking on work in connection with the provision of dwellings to use suitable materials and perform the work to an appropriate standard, so that the property is fit for habitation on completion, without substantial inconvenience, discomfort or risks to the health and safety of the occupants. However, in most cases RAAC would not have posed any danger on completion of construction, as opposed to risks arising later from degraded panels beyond their usual life expectancy. A fresh cause of action under the DPA can be triggered by subsequent refurbishment, and building maintenance records should be carefully considered.
Breach of duty depends on what a reasonably competent professional should have known at the relevant time. The risks were first identified in the 1960s in architectural circles and some UK buildings had to be demolished in the 1980s, due to concerns over RAAC. The Building Research Establishment and other industry bodies warned of structural deficiencies in the 1990s, followed by alerts from the Department for Education in 2018 and the Standing Committee on Structural Safety in 2019. Similar to cladding claims, allegations of negligence are likely to be challenged, where defendants were following the accepted practices at the relevant time.
Surveyors or valuers may face scrutiny where buildings have been signed off as safe or overvalued without consideration of RAAC implications, but proving loss caused by a breach of duty may be difficult, where problems affecting the property value remain the same in any event. Property managers could be at fault if RAAC has fallen into disrepair, and accountable persons under the BSA regime should ensure compliance with new competency and safety reporting requirements.
How do maintenance obligations interact with design life?
In many cases RAAC should have been replaced by now, given the limited lifespan. Decisions appear to have been taken long ago to implement its use across substantial portfolios, without appropriate plans in place for maintenance, ongoing investment and renewal. Academic studies suggest that well installed and maintained RAAC can significantly outperform the standard 30-year lifespan expectation. A design life of 60 years is typically assumed for buildings, depending on the type of construction and intended use.
Construction contracts often include requirements that the works or their components achieve a certain design life, a concept which is closely linked to maintenance. In Blackpool BC v Volkerfitzpatrick Ltd  EWHC 1523 (TCC) (15 June 2020), a case concerning the alleged premature failure of a tram depot exposed to harsh environmental conditions, it was held that a structure is not intended to be maintenance free for the whole of its design life, but equally should not require major repairs during that period. Precisely what constitutes reasonable (as opposed to non-standard or unduly onerous) maintenance is a question of fact and degree, depending on the contractual provisions.
RAAC buildings should be subject to regular inspections, to check the condition of the reinforcements and look for signs of deterioration. Good roof maintenance practices are particularly important, ensuring the free drainage of water and protection of external surfaces with sufficiently robust impermeable coatings.
Will insurance cover RAAC losses?
Property insurance is designed to cover damage to insured premises caused by specified perils, often defined as including storms, floods, subsidence, fire or theft, subject to the operation of policy exclusions. RAAC would not be a named peril and even where a broader provision applies for other ‘accidental damage’, this would ordinarily exclude cover for defective design or building materials, inherent vice, latent defect, gradual deterioration and/or wear and tear.
The legal test for ‘damage’ requires adverse physical change, impairing value or usefulness, which could include cracking or internal corrosion to RAAC panels, as well as catastrophic failures. Where damage occurs, it will be a matter of expert evidence as to the relative impact of the contributing factors, to determine whether the proximate cause of loss is within the scope of policy coverage.
While unforeseen consequences of a design defect or flawed system adopted by contractors can in some circumstances provide the requisite element of fortuity, notwithstanding concurrent gradual deterioration under ordinary usage (Versloot Dredging BV v HDI Gerling Industrie Versicherung (The DC Merwestone)  UKSC 45); this principle has been tested primarily in marine insurance cases and the position with RAAC is distinguishable, given the expected performance of this material in relation to its anticipated lifespan. Insurers will say that RAAC exposures are simply a case of pre-existing weakness, compounded by negligent failure to adequately maintain and/or replace design life-expired components.
Policyholders should be mindful of relevant conditions in their insurance contracts, including terms requiring ‘reasonable precautions’ to prevent or mitigate loss, and timing for notification of claims. Insurers may begin to ask questions at each policy renewal as to whether owners have properties which may contain RAAC, and this is likely to be a material fact which must be disclosed to insurers as part of a fair presentation of the risk. Moving forward it is expected that insurers may seek to introduce policy exclusions relating to RAAC and/or retroactive dates, to limit potential exposures.
To the extent that negligence claims are not time barred, professional indemnity (PI) insurance may respond, and the Third Parties (Rights against Insurers) Act 2010 could be relevant for claims against insolvent companies. Policyholders involved in multiple projects involving RAAC towards the latter stages of its use in the UK may consider making block notifications, though insurers can be expected to challenge their validity and scope. Issues of prior knowledge and fair presentation are likely to be contentious, given industry awareness of the potential problems over many years.
Latent defects insurance is unlikely to provide cover for RAAC remediation, as these policies typically provide an indemnity period of 10-12 years from practical completion and will have expired many years ago. The BSA introduces a statutory duty to provide new home warranties with an increased minimum term of 15 years, and further regulations are anticipated on the required scope of cover, but this will not help with the recovery of historical RAAC remediation costs.
The Risk Protection Arrangement (RPA) provides an alternative transfer mechanism to commercial insurance for schools. However, the RPA includes broad exclusions for: ‘gradual deterioration […] wear and tear […] inherent vice, latent defect […] corrosion, rust’ and recent guidance issued through the claims’ portal confirms that the costs of investigating and/or replacing RAAC are not covered.
What lessons can be learned?
RAAC represents another unfortunate legacy issue in the construction landscape, requiring urgent steps from government and industry stakeholders to implement a coordinated and transparent approach, proactively managing the safety risks. Many people will be adversely affected with millions of pounds likely to be spent rectifying the issues. Investors should take care to perform appropriate due diligence on sales and purchases.
While comparisons have been made with the cladding crisis, the impact on legal and insurance claims will be much less severe because of the historical context surrounding the design and construction of RAAC. Claims may still be possible, including against professionals involved later on in the history of a building.
Following an exceptionally hard market for construction PI in recent years, capacity is reportedly improving, and cover should be available to facilitate remedial works. Calls for reform include the possibility of structural defects cover for the full lifecycle of a building, linked to agreed maintenance requirements, providing opportunities for innovation through the broker and insurer communities.
Looking ahead the BSA should help to embed a culture of high standards and clearer lines of responsibility, linked to the new regulators, dutyholder regime and ‘golden thread’. Improved education would be helpful across the industry on new construction methods and materials, particularly design life expectations for techniques including modular and sustainable building practices. Public procurement processes should be refined to evaluate project proposals based on the total costs to deliver and maintain a building long-term, rather than just the baseline costs for practical completion.
Amy Lacey is a partner at Fenchurch Law