Building Surveyor

Building Certifier insurance Crisis in Australia

The insurance market for Building Certifiers in Australia is currently in massive turmoil and upheaval in relation to Professional Indemnity insurance. The number of insurers offering coverage is minimal, with costs skyrocketing, excesses increasing greatly, and blanket exclusions being applied for Combustible Cladding.

Different states and territories have different legislative insurance requirements for Building Surveyors.  Currently three (3) out of 7 states and territories expressly allow cladding exclusions in policies, and the other four (4) do not have any stated requirements and remain silent.

A summary of Building Certifier Insurance Requirements as at January 2020, is provided below:

Queensland Building Certifier Insurance Requirements
  • Minimum limit $1,000,000 any one claim
  • Minimum limit for Defence costs 20% of limit or $ 100,000 whichever the greater
  • Cladding Exclusion allowed with sunset clause expiry 30th June, 2021
     
Victoria Building Practitioners Insurance Requirements
  • Minimum limit $1,000,000 any one claim excluding Defence costs, or
  • Minimum limit $1,500,000 including Defence costs.
  • If a building surveyor enters into an agreement under s 215 of the Building Act 1993, minimum limit is $ 5,000,000.
  • Cladding Exclusion allowed
     
ACT Building Certifier Responsibilities
  • Minimum limit $ 1,000,000 any one claim and in the aggregate, and 20% additional of limit for Defence Costs.
  • Cladding Exclusion – Silent. Notably, there is no requirement to be “Cladding exclusion free”.
     
WA Building Certifier contractor (individual) insurance requirements
  • Minimum limit $ 1,000,000 any one claim and $ 2,000,000 in the aggregate
  • Cladding Exclusion – Silent. Notably, there is no requirement to be “Cladding exclusion free”.
     
NSW Building Certifier Insurance Requirements
  • Minimum limit $ 1,000,000 any one claim (excluding legal costs)
  • Minimum limit $ 2,000,000 in the aggregate over policy period (excluding legal costs)
  • Minimum limit $ 2,000,000 any one claim (including legal costs)
  • Minimum limit $ 4,000,000 in the aggregate over policy period (including legal costs)
  • Retroactive Date that is the first day the certifier was accredited
    Cladding Exclusion is allowed for all policies, not exceeding 12 months, commencing before 30th June, 2020
     
South Australia Private Building certifiers Professional indemnity insurance requirements
  • Minimum limit $1 000 000 any one claim.
  • Minimum limit $2 000 000 in aggregate during any one period of insurance.
  • Defence costs in addition to the limits
  • Retroactive date no later than the date on which the private certifier first commenced work as a private certifier.
  • Indemnity in respect of claims under the Trade Practices Act 1974 (Commonwealth) or the Fair Trading Act 1987 for acts or omissions, other than dishonest, fraudulent, malicious or illegal acts or omissions and excluding any portion of a claim made pursuant to the penal or criminal provisions of either Act.
  • A right to at least one automatic reinstatement of the limit of indemnity.
  • Indemnity for claims for damages arising from inadvertent Defamation.
  • Indemnity for any liability to third parties arising from the loss or destruction of documents.
  • Indemnity for claims for negligence on account of the dishonesty of employees
  • Cover for partners, principals or directors who join the business, firm or company for professional liability arising from previous work as a private certifier and for claims against partners, principals or directors who retire or resign from the business, firm or company.
  • Cladding Exclusion – Silent. Notably, there is no requirement to be “Cladding exclusion free”.
     
Northern Territory Building Certifier Professional Indemnity insurance requirements
  • Minimum limit $1 000 000 any one claim.
  • Cladding Exclusion – Silent. Notably, there is no requirement to be “Cladding exclusion free”.
     
Tasmanian Building Certifier Professional Indemnity Insurance requirements
  • Minimum limit $1 000 000 any one claim.
  • Cladding Exclusion – Silent. Notably, there is no requirement to be “Cladding exclusion free”.

How to reduce your Building Certifier exposure in the short term

In terms of the immediate solutions, a recent report specifically commission by the Department of Housing and Public Words in Queensland and provided by PWC, gave no solution to the cladding crisis.

From my reading of the commissioned Interim report’s, the only quasi solution or recommendation to the issue was a paragraph on page 42 of 64 pages, and read as follows

“Professionals reported some positive outcomes as a result of changes to PI insurance, such as increases in risk management procedures and peer review. Notwithstanding, the majority of sentiments relate to continuing business uncertainty and worry.”

Professional Indemnity insurance only provides coverage if a policy is in place at the time of the future writ, and Construction Risk policies do have Defective work and Design exclusions.

Long Term solutions to Defect and Construction risks for Building Industry Professions

There are potential solutions.  A Building Certifier inspects the mandatory stages of building work through inspecting sites. They determine if there are issues with the build. A plan that gave greater certainty and involved strict liability ie no fault on the part of the third party, could be an option. For example, existing Workers Compensation schemes provide no-fault, strict liability coverage.

The advantage of this, is that insurance is in place, the ‘who is liable’ issues are not contested, consumers are paid expeditiously, builders and developers have coverage and certainty. This should ultimately result in reduced costs for all involved and improved building quality due to a no-fault, strict liability scheme in place.

This type of insurance is called Decennial Insurance.  An article by Christopher Kerin from Kerin Benson Lawyers summarizes the advantages of having Decennial Insurance.

Another well written article by Kim Lovegrove addressed what caused the issues, and the methods of improving the landscape.

I hope this paper overall contributes towards providing information to assist in having a purposeful action plan put in place by authorities to resolve long-term the issue of insurance for Building Surveyors.

We are happy to provide a Professional Indemnity insurance quotation for your Building Certifier insurance from the limited insurers available in the current market also.