State Governments Move To Protect Certifiers Despite Risks

State Governments allow certifiers to continue practicing

The New South Wales Government has enacted a 12-month exemption for certifiers concerning cladding to ensure most can access insurance. This exemption comes in line with the Victorian and Queensland Governments’ proposals.

The Victorian Minister for Planning has issued a Ministerial Order which will ‘revoke’ the Building Practitioners’ Insurance Ministerial Order (dated 27 May 2014). This Order immediately replaces the previous Order with effect from 12 August. The Order establishes a new structure that requires building practitioners to hold the necessary insurance. However, it provides an exemption for cladding-related exclusions enacted by the insurer. In essence, this will allow practitioners who cannot obtain insurance without cladding-related exclusions to continue practicing for now. 

A temporary measure

This may not be a complete solution. However, this proposed act was labelled as a temporary measure. Industry figures remain concerned over the expiry of professional indemnity insurance, which will occur for building practitioners across the next 12 months.

A specified level of professional indemnity insurance, without exclusions or special conditions, is mandatory to be granted necessary accreditation. Where policies lapse and cannot renew, building certifiers without a provider will be at a standstill and unable to issue permits. However, current government action seeks to temporarily delay this occurrence.

In response, many insurance providers have refused to provide or renew professional indemnity insurance policies. At least not without significant exclusions or special conditions relating to cladding-related claims. In addition to significant price increases that will flow onto the construction industry. As a result, numerous insurance providers have already withdrawn from the market.

The Australian Institute of Building Surveyors (AIBS) claims that the few insurance providers ‘sourced to offer exclusion-free policies’ have since exited the market. AIBS claims the issue has been known to authorities in all jurisdictions since June 2018.

As a result, many are concerned about the unavailability of coverage that satisfies the necessary criteria for registering building certifiers. Particularly in Queensland, New South Wales and Victoria, where the last remaining provider of exclusion-free insurance policies will no longer guarantee coverage from 2 July 2019.

What is likely to happen in the sector?

In a recent feature, we noted that this information, the surrounding events and discussion have understandably caused significant concern. Many want to ensure that buildings and structures that contain unsafe cladding are rectified and the legislative landscape suitably updated.

What will happen when the providers protected by this temporary act no longer have insurance? While Government intervention is likely to ease pressure in the short term, we believe this may create further issues in the following years. AIBS Chief Executive warns that the shift in potential liability for uninsured practitioners can catalyse a market exodus.

‘But as building surveyors can’t get the insurance, you’ll find them going out of business and there’ll be a slowdown in the construction industry… If you don’t have anyone left being able to be registered in 12 months, then [the industry will] stop,’ he said in a recent interview with the ABC.

Don’t find yourself in the dark: Find a trusted certifier for the long term

It is in the best interest of all stakeholders to verify their current certifier’s position. Furthermore, you should identify and align with a certifier who can demonstrate a consistent record of and adherence to quality. The certifier should have a professional indemnity insurance policy without exclusions or special conditions.

Hendry is proud to confirm that, due to our long-standing record of quality and professionalism, we are one of a limited number of organisations in Australia that have successfully renewed our professional indemnity insurance, significantly above the minimum required levels. With no exclusions or special conditions, we can maintain the ability of our building certifiers and surveyors to continue to practice without restriction across our national offices.

Our experts can address your concerns across building compliance and certification. Additionally, our experts can answer any questions you may have surrounding external cladding. Our team has decades of experience managing issues across property portfolios and buildings.