As the year draws to a close and we enjoy a well-deserved break, time is ticking down to the end of the transitional exemption from compliance with the mandatory insurance requirements under the Design and Building Practitioners Act (Act). As 1 July 2022 approaches, this may be the opportune time out to prepare.
And if you haven’t done so already, time is more quickly running out (at 31 December 2021) to submit an application to be registered as a practitioner under the Act, to have the benefit of deemed registration.
The mandatory insurance requirements apply to all registered design practitioners, principal design practitioners, professional engineers and building practitioners.
Registered design practitioners, professional engineers and building practitioners are required to be “adequately insured”, which is to be indemnified by insurance that complies with the Regulation (or some other arrangement), against “any liability” to which the practitioner is exposed as a result of providing the declaration or doing the work.
For registered design practitioners and professional engineers, this must be a professional indemnity policy. For building practitioners, this can be a professional indemnity policy (traditionally, largely unavailable to this market) or another policy. In addition, exemptions may apply to building practitioners who do not have adequate cover when making compliance declarations, if they are unable to obtain insurance.
For registered professional engineers, an approved arrangement will suffice, which is either satisfying the insurance requirements under a professional standards scheme or a recognised engineering body’s insurance requirements.
For registered design practitioners and professional engineers, policies must be retrospective to all liability from the date of registration.
Policies must provide an “adequate level of indemnity” for the work carried out. To assess whether there is an “adequate level of indemnity” for registered practitioners, the Regulation requires consideration of the following:
It is worth noting in this regard that the statutory duty of care introduced by the Act has broadened the scope of liability and the classes of people who may be liable (for example, suppliers and manufacturers) for claims that current or subsequent owners can make for pure economic loss. It is also retroactive.
Notwithstanding the required considerations in the Regulation, it is at the discretion of registered practitioners to determine what is adequate, for them. Practitioners must keep records, for at least five years, as to how the practitioner has determined the adequacy of the indemnity, and may be required to produce those records.
It is unlikely that legacy policies will provide an “adequate level of indemnity”, given the requirements for coverage of “any liability”. Restrictive insuring clauses, as well as exclusions, would not meet this requirement.
So will adequacy be defacto determined by (lack of) market availability, or will the market respond by creating a product that addresses the Act? If so, at what cost?
As the market grapples with this, some policies have been carving out liability under the Act during the transitional period to 1 July 2022.
Insurers are expected to have a low appetite to take on the risk of projects which predated the compliance provisions of the Act, so we would not expect policies to go beyond the required retroactivity to the date of practitioner registration.
Time is running out for this to be resolved, and registered practitioners may need to set aside time over the summer shutdown period to actively engage with their brokers and professional associations for how they will work to address this, before the transitional period ends on 1 July 2022.
Authors: Christine Jones & Stephanie Tan
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Ericon Buildings Pty Limited v The Owners Strata Plan No 96597 [2020] NSWCATAP 265
APPEAL – HOME BUILDING – ancillary order – offer of consent judgment – tribunal's discretion. Civil and Administrative Tribunal Act 2013; Civil and Administrative Tribunal Rules 2014; Design and Building Practitioners Act 2020; Home Building Act 1989; Strata Schemes Management Act 2015.
The Owners – Strata Plan No 79633 v Graorovska; Graorovska v The Owners – Strata Plan No 79633 [2021] NSWCATCD 103
LAND LAW – strata title – maintenance and repair of common property – access order – work order – consideration of reasonable scope of works. Civil and Administrative Tribunal Act 2013 (NSW); Home Building Act 1989 (NSW); Strata Schemes Management Act 1996 (NSW); Strata Schemes Management Act 2015 (NSW).
Green v Modern Roof Restorations (NSW) Pty Ltd [2021] NSWCATCD 101
BUILDING AND CONSTRUCTION – defective and incomplete works – whether rectification is the preferred outcome. Home Building Act 1989 (NSW).
Varsani v Sunrise Pools Australia Pty Ltd t/as Sunrise Pools [2021] NSWCATAP 386
HOME BUILDING – delay by owner in respect of scope of alleged defective work – termination by builder by acceptance of alleged repudiation from delay – validity of defect notice. Civil and Administrative Tribunal Act 2013 (NSW); Civil and Administrative Tribunal Regulation 2013 (NSW); Civil and Administrative Tribunal Rules 2014 (NSW); Home Building Act 1989 (NSW).
Douglas t/as D&C Pool & Landscape Creations v Luscombe [2021] NSWCATAP 403
HOME BUILDING – reasons for findings on expert evidence concerning aggregate size – no issue of principle. Civil and Administrative Tribunal Act 2013 (NSW); Civil and Administrative Tribunal Regulation 2013 (NSW); Civil and Administrative Tribunal Rules 2014 (NSW); Evidence Act 2005 (NSW); Home Building Act 1989 (NSW).
Regulation and other miscellaneous instruments
Community Land Management Act 2021 (NSW)
Community Land Management Regulation 2021 (NSW)
The Acts and Regulation commenced on 1 December 2021 and looks to “align community schemes laws with strata schemes laws, simplifying the development process and providing more modern, flexible governance arrangements for developers, residents and commercial occupants of community lands”.
Disclaimer
The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.
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