What is a Collateral Warranty?

Collateral warranty is a term to describe a document normally designed to give contract rights to another party with an interest in a building development, but who has no rights under the main client contract.

The purpose of the collateral warranty is to provide additional security for other parties involved in a construction project, but who are not directly linked to the parties delivering it. The warranty can give a third party the right to sue the warrantor.

Collateral warranties can have significant implications for the coverage provided by professional indemnity insurance policies. 

We have a helpful guide that you can read on this subject: Guide To Collateral Warranties (and Professional Indemnity). 

For more information or a discussion with one of our experts, please call 0345 251 4000.