Commercial Structural Defects Insurance - To Go or to Stay?

December 2011

The Building Industry has been calling for a review of this insurance that is currently a mandatory requirement of Commercial Practitioner registration.

As a result, the Building Commission appointed a consultant, who, after limited consultation with some industry participants produced a discussion paper.

That discussion paper was released for public comment around the middle of 2011 with responses required to be submitted at the end of August.

Discussions with Professional Institutes and Associations that have a vested interest in this matter has revealed that many of them raised several objections to the apparent intention of the discussion paper to remove this mandatory insurance requirement. “Why are Commercial Builders so special?” they ask. As a result several responses were submitted to the Building Commission. Included in these responses was a suggestion that the scope of cover that currently exists be expanded to include cover for all defects, not just structural defects. This issue has not yet been rejected by the insurance industry.

If this occurs it will be the first time an insurance policy can be purchased by a commercial builder that provides them with “total” protection in the event of a defect arising out of their work. This contrasts with the Domestic Builder’s Warranty which offers no protection for the builder in respect of their defects. With so many different sources of supply having input into a commercial building these days this could be a very real benefit for builders.

Currently all responses to the paper are being considered by the Building Commission. No timetable has been released as to when the Building Commission will present another paper for further review.

Unfortunately to date no discussion, that we have been part of, has considered the real value this policy delivers for builders – it does actually provide insurance protection for the builder in the event of a structural failure occurring in a building they have completed.

As can be seen below – buildings sometimes don’t work out as planned!



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