Protection Works "Builders and Building Surveyors beware!"

Under the Victorian Building Act 1993 (the Act) Part 7 deals with the protection of adjoining properties from damage caused by protection works undertaken as part of a construction project.

The extent and intrusiveness of such works obviously varies depending upon the proposed construction. However, what does not vary is the insurance that the Building Owner is obliged to ensure is in force where the project involves the undertaking of protection works. These requirements are prescribed in section 93 of the Act.

Unfortunately the words used in section 93 to define the required insurance have been poorly drafted and as a consequence can be difficult to satisfy. Despite our numerous offers to assist the Victorian Government revise them, nothing has changed.

A very real risk exists in this area for Building Owners, Builders and Building Surveyors that non-compliant insurance is arranged.

Despite the obligation for the Building Owner to ensure the insurance is in force it is often left to the Builder to organise this insurance through their normal Construction Risks Liability policy.

Due to the unique (and difficult to satisfy) insurance requirements under section 93, the Builder may find that they have no cover at all if they cause damage to a neighbouring property that arises as a result of protection works.

If that eventuates then it may be the Relevant Building Surveyor (who must carry professional indemnity insurance) called upon to indemnify the neighbour if the Relevant Building Surveyor issued a building permit in reliance upon non-compliant insurance.

The Act calls for the following insurance to be in place:-

93      Owner to arrange insurance cover

(1) Before any protection work is commenced in respect of an adjoining property, an owner must ensure that a contract of insurance is in force, in accordance with this section, against
     (a)    damage by the proposed protection work to the adjoining property; and
     (b)    any liabilities likely to be incurred to adjoining occupiers and members of the public during the carrying out of the building work and for a period of 12 months after that building work is completed.

(2) The contract of insurance must be entered into with an insurer and for an amount
     (a) agreed to by the owner and the adjoining owner; or
     (b) in the event of a dispute, determined by the Building Appeals Board under Part 10.

(3) The owner must lodge a copy of the contract of insurance with the adjoining owner before the commencement of the protection work.

(4) The owner must ensure that the contract of insurance is renewed or extended as often as may be necessary during the carrying out of the building work and for 12 months after that work is completed.

(5) The owner must lodge a copy of a document evidencing the renewal or extension of the contract of insurance with the adjoining owner as soon as it is practicable to do so after the renewal or extension.

Various significant penalties apply to the Building Owner for failing to adhere to the above requirements. Maximum penalties are up to $75,000 for a natural person and $370,000 for a company. This financial loss may then be passed onto the Builder and/or the Building Surveyor.

Whilst it may appear that the insurance called for is nothing more than a public liability policy that a builder would normally carry. Where section 93 becomes tricky is the requirement that the insurance cover ANY liabilities likely to be incurred. All insurance policies have terms, conditions and exclusions and therefore it is most unlikely that an "off the shelf" insurance policy will be so generous as to cover any liability.

The existence of the words likely to be incurred in section 93 do appear to bring the requirement back to a more reasonable level; however the scope of cover required remains open to interpretation and therefore difficult to objectively determine.

It is our view that many standard public liability policies can provide the coverage that is intended even if technically they do not comply in their off the shelf form however some minor amendments are usually required.

An emerging trend in the insurance industry is to provide a Special Endorsement for the insurance required for protection works. Our review of some of these indicate that rather than extend cover they can have the reverse effect of reducing the cover normally provided.

Bovill Risk & Insurance Consultants Pty Ltd provide one of the few insurance products in the insurance market that explicitly states that it complies with Section 93 of the Building Act thereby guaranteeing compliance with the Act. We also provide an advisory service to our clients to assist in assessment of policies arranged by others to satisfy the requirements of section 93.

As a Building Owner, Builder or Building Surveyor it is essential that close attention is paid when assessing compliance of an insurance policy with Section 93 in relation to protection works. If you are unsure of compliance you should seek specialist advice.

For more information please contact us on 1800 077 933.

 
 

BOVILL RISK & INSURANCE CONSULTANTS

Specialist Insurance Brokers