If you work in the Australian building industry, professional indemnity insurance is essential. It protects you and your business against claims for negligence that might come from a damaging act, error or omission in the performance of your services. Essentially, it keeps your business safe.
But changing legislation and industry regulations are making it difficult for building professionals to get the right cover to reduce risk to a comfortable level.
Building surveyors, in particular, are struggling to get fair and reasonable professional indemnity insurance following a recent move by insurance companies to introduce strict cladding exclusions. That is, insurers are attempting to limit their liability on buildings that are clad in potentially combustible materials, making life difficult for building surveyors and building owners.
Fortunately, fair and reasonable professional indemnity insurance for building surveyors is still possible with the right insurance policy in place.
Why are insurers refusing to cover cladding in their insurance policies?
Recent months have seen a shift towards building regulators and accreditation organisations refusing to accept the insurance policies of building surveyors. This follows a decision by many Australian insurance companies to impose onerous exclusions to existing insurance policies in relation to non-compliant cladding.
The decision is a direct response by local regulators following London's Grenfell Tower fire in June 2017, which killed 80 people and is thought to have been greatly accelerated by the exterior aluminium composite cladding of the building.
The trend also follows an audit by the Victorian Building Authority (VBA) in 2015 after a cladding fire at the Lacrosse Tower in Melbourne’s Docklands.
As with all public inquests, insurers are nervous. Public safety is paramount. But to cover themselves, insurance companies are applying blanket cladding exclusions to policies with broadly worded clauses about building materials, rather than targeting non-compliant cladding.
What is non-compliant cladding?
Non-compliant cladding refers specifically to combustible cladding aluminium composite panels with polyethylene core or expanded polystyrene. The material is less expensive than some fire-resistant cladding alternatives and is aesthetically pleasing to designers. So, combustible cladding has become a widespread material used on multi-storey buildings in Australia and overseas.
Following a Senate inquiry into non-compliant building materials, the use of aluminium composite panels with a polystyrene core and the use of expanded polystyrene in Victoria on buildings above two storeys is now classed as non-compliant.
Do building surveyors really need professional indemnity insurance?
Absolutely! Professional indemnity insurance is actually a requirement of the Building Professionals (BP) Regulation 2007 under the Building Professionals Act 2005. The Act requires building professionals to have professional indemnity insurance for their whole period of accreditation, to protect both the certifier and the community.
Because building surveyors provide professional advice that can result in financial loss or injury, professional indemnity insurance is important to cover the legal costs associated with defending a negligence claim.
Professional indemnity insurance covers building surveyors for:
- mistakes based on the advice you give
- mistakes in designs, plans or calculations
- accidental disclosure of data or infringement of a client’s legal rights.
How can I get fair and reasonable professional indemnity insurance that includes cladding cover?
If you’re a building surveyor and you’re struggling to get professional indemnity insurance, BlueRock General Insurance can help. Our extensive experience within the construction industry has fostered great partnerships with a number of supporting underwriters who do not apply a cladding exclusion to their professional indemnity insurance policies.
Our team works with building surveying companies of varying sizes across Australia. As a result, we believe we’re well placed to assist you with alternative insurance terms for your professional activities, so you can stop worrying and get back to business.
Want to better protect your business? Get a free review of your current insurance policies.