How New Insurance-Backed Indemnity Policies Work in Rights of Light
By Neil Goddard · 22 September 2026
This insight is for general educational purposes only and does not constitute legal advice. Always obtain specialist professional advice before taking or refraining from any action.
When a developer builds near your property and blocks some of your natural light, you might assume you will deal directly with the developer if things go wrong. But increasingly, developers take out insurance policies before they start construction, and these policies can shape the entire claim process in ways most property owners never expect. Understanding how insurance-backed indemnity policies actually work in rights of light disputes gives you a real advantage if you ever find yourself on the receiving end of one.
A rights of light indemnity policy is a type of insurance that a developer purchases before or during construction. The policy covers the developer against the financial risk of a successful rights of light claim by a neighbouring property owner. In simple terms, if you bring a claim and win compensation, the insurer pays out rather than the developer funding it from their own pocket. From the developer's perspective, this turns an unpredictable legal risk into a known, fixed cost. From your perspective as a property owner, it changes who you are really negotiating with.
One of the most common misconceptions is that the existence of an insurance policy somehow limits what you can claim. It does not. Your legal rights remain exactly the same whether the developer is insured or not. If you want to understand what a right of light is and how it arises under the Prescription Act 1832, the insurance policy does not alter any of that. Your right is a property right, enforceable against the developer regardless of their insurance arrangements.
However, the practical reality is that insurers bring a different approach to settlement negotiations. Developers might be motivated to settle quickly to avoid delays to their project. Insurers, on the other hand, are experienced in managing claims and often take a harder negotiating stance. They employ their own surveyors and solicitors. They will scrutinise your claim carefully, challenge the valuation methodology, and push for the lowest possible settlement figure. This does not mean you should accept a low offer. It means you need to be prepared.
The valuation of your claim still follows the same principles whether an insurer is involved or not. Courts and surveyors look at the diminution in the value of your property caused by the loss of light, and in many cases they also consider a share of the developer's profit attributable to the obstruction. You can read more about how compensation is calculated to get a clearer picture of what a fair settlement looks like. The key point is that an insurer cannot impose a lower standard of compensation just because they are footing the bill.
There is another important angle to consider. Developers sometimes use the existence of an insurance policy as a reason to press ahead with construction despite knowing they are likely to infringe a neighbour's rights of light. The logic is straightforward: if the policy covers any damages award, the developer faces no real financial consequence. This can feel deeply unfair if you are the affected neighbour. Courts have recognised this tension. In cases like Coventry v Lawrence [2014] and the landmark Shelfer v City of London Electric Lighting Co [1895], the courts have emphasised that an injunction, not just damages, can be the appropriate remedy where a developer has acted with knowledge of the infringement. The existence of insurance does not automatically push the court towards awarding damages instead of an injunction.
If you receive a settlement offer that seems to have come from an insurer rather than the developer directly, pay close attention. The offer may be strategically low, designed to test whether you will accept a quick payout. Before responding, it is worth getting professional advice on your legal rights as a property owner so you understand the full picture. A rights of light surveyor can assess the actual impact on your property, and a solicitor experienced in this area can advise on whether the offer reflects a fair assessment or a lowball figure.
Some policies also contain subrogation clauses, which means the insurer steps into the developer's shoes for the purpose of defending or settling the claim. In practice, this means your correspondence and negotiations may be handled entirely by the insurer's appointed representatives. You are still bringing your claim against the developer, but the insurer controls the defence. This is a standard feature of indemnity insurance and does not change your entitlement.
The bottom line is this: insurance policies are a tool developers use to manage their risk. They do not reduce your rights, limit your compensation, or prevent you from seeking an injunction. But they do change the dynamics of negotiation. Knowing that an insurer is involved should prompt you to get proper professional support early in the process. If you are unsure where to start, you can request a free assessment to understand your position before making any decisions.
Reference: Shelfer v City of London Electric Lighting Co [1895] 1 Ch 287; Coventry v Lawrence [2014] UKSC 13; Prescription Act 1832