As a broker, I see that when a wall cracks because of a neighbour's building work, the injured party is in the reverse of the position that insurance articles describe: they are not the insured, they did not take out the policy, and often they do not even know who the contractor is, which insurer covers it, or whom to turn to at all. The knowledge base's article on damage to a neighbouring building describes the course of the case from the contractor's point of view; this article is for the other side: the owner of the house on whose wall the crack has appeared. This is not claims handling on your behalf and not legal advice – I try to clarify the order of the steps and the typical misunderstandings.
- The party that caused the damage – the contractor and/or the developer who commissioned the works – is liable for it; under Sections 6:472–6:473 of the Hungarian Civil Code (Ptk.), the liability insurer pays the established damages directly to the injured party, but the injured party cannot enforce the claim directly against the insurer.
- Under Government Decree 191/2009, the policy number of the compulsory contractor's liability insurance and the insurer's name must be recorded in the construction contract (or the contractor's declaration that it will have the insurance by the time the site is handed over at the latest) – the injured party can ask for this from the contractor or the developer, in writing.
- A missing condition survey does not extinguish the claim, but proof becomes harder: dated photos, an independent expert, a crack-monitoring seal and written notice of the damage as early as possible can make up for it.
Who is liable for the damage: the contractor, the developer – or both?
The starting point is Section 6:519 of the Hungarian Civil Code (Ptk.): anyone who unlawfully causes damage to another must compensate for it, and is relieved of liability if they prove that their conduct was not culpable. The injured party must therefore prove the damage, its amount and the causal link with the building work; the party that caused the damage must prove the absence of culpability. For certain works – the courts decide this case by case – earthworks, piling or demolition carried out with heavy machinery may qualify as an extra-hazardous activity (Ptk. Section 6:535), and in that case liability is stricter: the party that caused the damage is relieved of liability only by citing an unavoidable cause falling outside the scope of its activity. Whether the contractor or the developer – the owner of the plot who commissioned the building work – is liable is a question of the specific case; in practice, the injured party typically notifies both of them of the claim in writing, and the settling of accounts between the two – construction contract, chain of subcontractors – is no longer the injured party's concern. The building supervisory authority may investigate irregular construction work, but it does not award compensation: compensation is a civil-law matter, decided by agreement or, ultimately, in court.
Who should you ask for the insurer's details?
Two covers may come into play. One is the contractor's own liability insurance: from 15 January 2025, Government Decree 191/2009 (IX. 15.) requires every business contractor to have compulsory liability insurance, and under Section 3(2)(r) of the decree the construction contract must contain the policy number and the insurer's name and contact details, or the contractor's declaration that it will have the insurance by the time the construction site is handed over at the latest – I have described the details in the article on compulsory contractor's liability insurance. The other is the liability section of a contractors' all risks (CAR) policy taken out for the project, if the developer or the main contractor has taken one out. The injured party is not a party to either contract, so they have to ask for the details: from the contractor – whose name typically also appears on the board displayed at the site – and from the developer, in writing, together with a description of the damage and photos. The public search of the chamber's register of contractors (MKIK, the Hungarian Chamber of Commerce and Industry) shows whether the contractor is registered; whether the insurance details are visible too depends on how the register works at any given time, so it is not worth relying on. An outsider cannot see into the electronic construction log – it is kept by the developer, the contractor, the technical supervisor and the authority; if official proceedings are opened, standing as a party and access to the files are already legal questions. If the contractor does not hand over the details, that is no obstacle to the claim: the claim for compensation exists against the party that caused the damage, with or without an insurer.
Can you turn directly to the insurer?
This is where the most common misunderstanding lies. Under the liability insurance rules of the Civil Code (Sections 6:472–6:473), the insurer pays the established amount of compensation directly to the injured party – so the money goes to the injured party, not to the contractor – but the injured party cannot enforce the claim directly against the insurer. This differs from compulsory motor third-party liability (MTPL) insurance, where a separate act gives the injured party a direct claim; there is no such special rule for construction damage. In practice this means that the injured party can typically report the damage on the claims line of the contractor's insurer, but the insurer examines the liability of its insured – the contractor – asks for the contractor's statement, and pays only if the contractor's liability is established under the policy conditions and the damage falls within the cover of the policy. If the insurer declines, the claim remains against the contractor: it is the contractor who has to be sent a demand, with whom a settlement has to be reached, or who has to be sued. Under the Civil Code, a settlement between the insured and the injured party is effective against the insurer only if the insurer has acknowledged it – so before a handshake agreement with the contractor, it is worth involving the insurer as well. Case law has also examined the nature of the injured party's exceptional direct claim based on legislation (Kúria – Hungary's Supreme Court – Pfv.III.20.825/2020/7.): according to the Kúria, in such cases the injured party is enforcing their own claim for damages, not a claim based on the insurance contract; whom to sue and how in a specific case is a question for a lawyer. Be prepared for two further points. The liability insurer may compensate at depreciated value, following the damages logic of the Civil Code – I have described this in the article on depreciated-value compensation. And some policy conditions cover damage caused by vibration, groundwater drainage or the weakening of supports only under a separate clause; if the contractor's policy lacks this, the insurer may decline, and the contractor is then liable with its own assets.
No condition survey was made: how do you prove that the crack is new?
A condition survey before work starts is in the interest of the contractor and the developer: Hungarian CAR policy conditions typically deal with damage to neighbouring buildings in a separate clause and expect the insured to have a condition survey report; whoever fails to do this ends up in a dispute with their own insurer. A missing survey does not extinguish the injured party's claim, but proof becomes harder: the contractor will argue that the crack is old. What can you do? Collect every earlier, dated photo of the house – your own pictures, a property listing, a valuation, documentation of an earlier renovation, street-view images. A fresh crack typically has sharp, dust-free edges and the paint has not crumbled – an expert can record this credibly, so it is worth calling in an independent architect or a forensic expert before you repair anything. Ask the expert to fit a plaster crack-monitoring seal or a measuring point: if the crack opens further during construction, the movement is documented. Write down the day you noticed the damage and the work phase on that day – foundations, piling, demolition, heavy machinery – and notify this in writing to the contractor and the developer; here, too, delay is a disadvantage when it comes to proof. And do not have the crack repaired before the inspection: what has been repaired can no longer be assessed, and in any lawsuit an inspection by a court-appointed expert also becomes pointless. These are the same documentation principles that I recommended to the contractor's side in the article on the construction log – only now the camera is in the injured party's hands.
Your own home insurance and legal protection
Many people turn to their own home insurer first. Hungarian home insurance policy conditions typically do not treat cracking caused by vibration or earthworks at a neighbouring construction site as an insured event – the insurer pays only for what is an insured event under your contract – but it is worth checking the conditions and reporting the damage to your own insurer as well: if there is cover after all, the insurer pays and then claims the amount back from the party that caused the damage under Section 6:468 of the Civil Code. If your home insurance includes legal protection cover, the lawyer's and expert's costs of pursuing the compensation claim may be covered under the policy conditions – this is one of the typical uses of that product. As a general rule, a claim for damages becomes time-barred after five years under Section 6:22 of the Civil Code, but evidence is lost much sooner.
What should you do now?
Take dated photos, call in an expert, and notify the damage in writing – in a way that proves receipt – to the contractor and the developer, asking for the name of the liability insurer and the policy number. Report the damage on the claims line of the contractor's insurer, and notify your own home insurer as well. Do not sign a settlement without involving the insurer and without an expert's cost estimate, and do not have repairs done before the inspection. If the case gets stuck or becomes disputed, the next step is a complaint to the insurer; as a consumer – subject to the board's practice on its own competence – the Financial Arbitration Board (PBT); and against the contractor, a lawyer and the courts; the MNB (Hungary's central bank and financial supervisor) does not decide individual claims disputes. As a broker, I do not act on the injured party's behalf in a claim – but if the question concerns your own home insurance or legal protection cover, I help where I can.
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Sources
- Hungarian Civil Code (Ptk.) – Act V of 2013 (Section 6:22 limitation, Section 6:468 recourse claim, Section 6:470 the liability insurance contract, Sections 6:472–6:473 the liability insurer's payment and the injured party's enforcement of claims, Section 6:519 general liability, Section 6:535 extra-hazardous activity)
- Government Decree 191/2009 (IX. 15.) on construction activities (Section 3(2)(r) – policy number and insurer in the construction contract; Sections 21/B–21/G compulsory contractor's liability insurance)
- Balázs Tőkey: On the injured party's enforcement of claims against the liability insurer – Kúria decision No. Pfv.III.20.825/2020/7 (Kártérítési és Biztosítási Jog [Damages and Insurance Law], 2022/4)
- Építési jog: Damage to neighbouring buildings caused by construction – what insurance can be taken out? (condition survey report, clauses)
- e-epites.hu: Register of business contractors (MKIK chamber register)
