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Claiming against home building insurance

Posted by Marcus McCarthy | 08 October 2015 | Construction & Infrastructure

Contractors are required to insure their work if the value of that work will exceed $20K (this is provided for in the Home Building Act).  This insurance is paid out of the Home Building Compensation Fund and provides insurance cover to homeowners for defective work done by Contractors in the event the Contractor is unable to pay, it is not the home owners “first port of call”.   It is important to note that this insurance is a “last resort” policy and is only used where the Contractor has died, disappeared, is insolvent or has failed to comply with a monetary order of the Tribunal.

Practically speaking, this means that, before entering into a contract and commencing work, Contractors must take out an insurance policy which notes the homeowner as a beneficiary.  It is imperative when engaging a Contractor (this means a builder or any trade that will do more than $20,000.00 of work) that you check this insurance and also that they are able to undertake those works, check the fair trade website for details.

In  the recent case of Owners Corp–SP14846 v. Wesfarmers General Insurance Ltd t/as Lumley General [2015] NSWCATAP204- the Appeal Panel of the NSW Civil and Administrative Tribunal upheld the decision of the Tribunal which found that the Owners Corporation was not covered by the insurance policy which the Contractor had taken out because the work done (ie. the rectification of defective works) had commenced prior to the insurance policy being entered into.  It was a term of the agreement between the parties that insurance was to be provided by the Contractor, however, as the insurance policy was taken out after the work commenced, it was ineffective.

The Tribunal found (and the Appeal Panel agreed) that the terms of cover had not been satisfied, and as such dismissed the Owners Corporation’s claim against the insurer.

As this case demonstrates, home building disputes are complex and understanding the fine-print is essential. 

If you require assistance in dealing with home building defects or insurance issues, please contact our Construction Team on +612 9016 0141 or +612 4961 0002.

This publication is © Nexus Lawyers Pty Ltd and is for general guidance only. Legal advice should be sought before taking action in relation to any specific issues.

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