At a recent AGM one of our clients queried why we include the provision of terrorism cover within their buildings insurance; believing this to be an unnecessary expense. An important decision was reached in the Upper (Lands) Tribunal on 11th June 2014 which is of significant importance to this issue. The Upper Tribunal is the superior chamber to what was the Leasehold Valuation Tribunal (LVT) and hears the LVT appeals. The decision reached in QDIME LTD v Bath Building (Swindon) Management Company Ltd concerned the Freeholder providing terrorism cover, which was subsequently challenged by the leaseholders as being considered unnecessary and therefore an unreasonable expense.
The freeholder involved was obliged by the terms of the lease to "To keep the Building including the Demised Premises insured to its full reinstatement value against loss or damage by fire and the usual comprehensive risks in accordance with the CML (Council of Mortgage Lenders) recommendations in that respect from time to time and such other risks as the Landlord may in its reasonable discretion think fit to insure against..."
Although "terrorism" or "terrorist activities" are not specified in the CML guidance, it was submitted by the freeholder that the word "explosion" should be given its ordinary meaning and that the ordinary meaning would include explosions caused by terrorist activity. In this regard the freeholder relied upon the definition of "explosion" provided by the Oxford English Dictionary.
In giving Judgment, the Upper Tribunal held in favour of the freeholder, in that the ordinary meaning of the word explosion includes explosions caused by terrorism.
On the basis of this Judgment, property owners responsible for insurance should consider the requirement to obtain terrorism cover. The full decision can be downloaded from: http://www.landstribunal.gov.uk/Aspx/view.aspx?id=1043
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