01.03.2018

Webber Insurance 2018 Update

The insurance profession is closely following the developments in Australia regarding cladding. Chris Webber from Webber Insurance Services reports on this, plus other insurance matters.

We hope that everyone managed a fantastic break and are now back into the swing of things. 2018 is shaping as a big year in the construction industry, headlined by cladding and the upcoming planned changes to the Australian Building Code.

The insurance industry is closely following the developments around Australia regarding cladding. In January, a significant Ruling was handed down in the Supreme Court of Victoria. The Court needed to determine if relevant State authorities, in this case Victorian Building Authority (VBA), had the power to give ‘direction to fix building work’ under section 37B of the Building Act 1993 after a Certificate of Inspection or an Occupancy Permit had been issued for the building.

Judge Cavanagh ruled that the VBA acted outside of its powers when it directed the builder to rectify the buildings. The main reason being that the power (under section 37B) is unavailable after a Certificate of Inspection or an Occupancy Permit has been issued.

This Ruling has significant implications on Building Designers. By ruling that the VBA cannot order rectification works after the Certificate of Inspection or an Occupancy Permit has been issued, it means the costs of rectification to existing structures needs to be met by the building owners. Building owners may still attempt legal action against a builder and others involved in the design process, however this process is complex, time consuming and costly.

For now, Building Designers need to review their existing Professional Indemnity insurance cover to ensure that there is no adverse endorsement in their cover limiting claims arising from cladding related matters. Over the past year, insurers have started to include these limiting endorsements. Whilst the BDAV insurance policy currently has no such limiting endorsements, we have seen some that severely restrict your policy coverage. If you have concerns with your cover, please feel free to contact us for a review.

Whilst Building Designers can breathe a sigh of relief (for now!), it remains critical that, moving forward, care needs to be taken anytime ‘alternative methods’ are used within a design. What may be acceptable in a design today may lead to catastrophic results in the future.

Talking about the future, it is important for Building Designers to remember that claims arising from past work can now stretch out to 10 years past an Occupancy Permit being granted or issuance of the Certificate of Final Inspection. This means that for those considering retirement or change of career, Professional Indemnity insurance needs to be maintained for a minimum of 10 years post closure. Traditionally we place cover into runoff cover, which can either be done as a yearly purchase or as a block of multiple years. Talk to us if you would like more information about runoff cover for your business.

We have been following the changes suggested in the 2019 revision of the Australian Building Code. Currently it is too early to provide extensive comment, however it is important for all Building Designers and Energy Raters to keep on top of any Code changes. Failure to do so could result in a sub-standard design or energy rating. Energy Raters working on commercial buildings need to take extra notice as there will be many new changes under the title of Energy Efficiency. To read about the changes, CLICK HERE.

Finally, we have completed the review process of the BDAV Engagement Agreement and it is currently being trialed by a number of members. The review process included input from the BDAV approved insurer, the lawyer who handles BDAV related claims and the BDAV themselves. We are pleased with the final result and hope that it will be a fantastic addition or update to your existing risk management practices. The updated version will be released shortly to all members who have previously purchased the Agreement, plus also being provided at no cost to all Webber Insurance BDAV member clients. If you would like to assist with the trial, please contact with me.

We look forward to working with all BDAV members in 2018 and hope to see many of you at the upcoming BDAV event.

Chris Webber is the Managing Director of Webber Insurance Services with diplomas of both Insurance Broking and Risk Management. Webber Insurance Services is the approved Insurance Broker of the BDAV. For any enquiries, please call 1300 668 553 or email bdav@webberinsurance.com.au.