Building industry insurance crisis intensifies

The Property Council of Australia has joined other prominent industry bodies in calling for the Commonwealth, State and Territory governments to immediately convene an industry roundtable on resolving the insurance crisis for the building and construction sectors.

The Council’s Chief Executive Ken Morrison said: “For too long, different levels of government have been passing the buck on putting in place nationally consistent standards for building regulation and compliance.

“The cost of this intergovernmental merry-go-round is now being sheeted home as building certifiers are unable to do their jobs without insurance cover. This impending insurance crisis risks bringing the construction sector to a halt if it is not addressed urgently.” he explained.

Construction industry leaders also met in Canberra recently to urge the Federal, State and Territory Governments to act now to address the building certifier insurance crisis that has potential to bring building and construction activity to a halt. The National Insurance Brokers Association (NIBA) as well as the Insurance Council of Australia (ICA) have attested to the fact that the current state-by-state approach to solving building industry issues was too disjointed and inefficient.

NIBA has notified its members that the NSW Government has published a new Regulation which provides that certain risks associated with cladding and the use, application or installation of cladding, are not risks in respect of which an accredited certifier is required to be indemnified. The Regulation only applies to professional indemnity contracts of insurance that operate for a period not exceeding 12 months, and commence on or before 30 June 2020 and it may be necessary to seek legal advice in relation to the position of any particular client, and the insurance obligations that will operate in respect of that client.

The issues within building insurance have come to a head after multiple high-rise towers were evacuated in Sydney in the recent months, the NSW building industry is now the subject of an urgent overhaul to look at not just better insurance coverage for owners of buildings and contractors but to cast better oversight over the quality of construction.

Morrisson said, “Public confidence in the built environment, not to mention the hundreds of thousands of jobs supported by building and construction, demand this level of action from our governments. The federal government now needs to play a leadership role and bring together all state and territory governments as matter of urgency to deal with the looming insurance crisis.”

Federal Industry Minister Karen Andrews said states and territories needed to commit to a national response rather than announcing their own piecemeal strategies.

“The states rejected my offer for the federal government to fund a dedicated, national taskforce to work in conjunction with the states to implement the (Shergold-Weir Building Confidence report) recommendations,” she said.

The Australian Property Institute says the crisis will have a flow-on effect on other professionals including valuers, which could flatten the industry.

Currently, there are no statutory insurance protections for tall, large-scale apartment towers, apart from a statutory six-year warranty and apartment-owners in older properties will have little recourse to claims outside of seeking legal action. For our previous coverage on this evolving crisis please click here and here.