You know things have reached a critical point when governments don’t just start talking about an issue – they immediately act on it.

The issue of the moment that has forced governments to act is the crisis of confidence in the building industry’s construction standards. We are all familiar with the fears surrounding apartment and commercial buildings clad in flammable panels, but the problem doesn’t stop there. The evacuation of several apartment buildings in Sydney after cracks appeared in their structures is an indication of just how deep the problem is.

The New South Wales Government has started a parliamentary inquiry into the troubled sector, while in Victoria a $600 million rectification plan for private high-rise towers that carry flammable cladding is about to begin.

Inevitably insurance has been caught up in the mayhem. As News Limited business commentator Alan Kohler put it recently, insurance is “the canary in the coalmine”.

Politicians had taken nearly a year to seriously discuss the Shergold Weir report on improving compliance and enforcement of building codes. But when insurers began to impose tough restrictions on building surveyors’ professional indemnity (PI) insurance, governments were forced to respond immediately.

At the Building Ministers’ Forum in July, the federal and state governments finally committed to all 24 suggestions in the Shergold Weir report.

However, the insurance industry is maintaining its tough stance, waiting for action to follow the ministers’ pledges about lifting building standards and regulatory oversight. In the meantime, getting suitable PI cover or renewing an existing contract is becoming increasingly tough for building professionals.

Not only have premiums risen alarmingly quickly – in some cases more than doubling – underwriters are imposing tougher conditions and in many cases demanding a comprehensive risk management program.

Certifiers and surveyors can no longer get exclusion-free PI covers. In those states where full cover has been a requirement for surveyors and certifiers, licensing conditions have had to be temporarily relaxed to allow PI policies with exemptions.

This means that affected building professionals are now exposed to massive liabilities if anything they certify or approve is later found to be non- compliant with the standards.

The risks from non-compliant aluminium panels and flawed documentation extend into other forms of insurance as well.

“The presence of combustible cladding is likely to increase the amount of first-party property loss and third-party damage or injury in the event of a fire, a PwC report prepared for the Queensland Government says. “Public liability insurers are concerned about the risks posed to occupants and their property in the event of a fire involving non- compliant cladding, particularly where the building owners may be aware of the non-compliance.”

There, in a nutshell, is how the building crisis is affecting insurance and everyone working in the construction industry. The danger is that without insurance, nothing can happen.

Making sure you have your liability bases covered – no matter what industry you work in – is especially crucial in these difficult times. Give us a call and we will help you sort your way through the issues.

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