Lexology published a detailed market insight by Clyde & Co, and our own Glenn Ross has provided an excerpt of relevant information below. The full length document is available here.
Since 2017 there has been a rapid withdrawal of professional indemnity insurance capacity from the Australian market, both in the construction sector and generally. The withdrawal has come after a sustained period of unprofitability that has been exacerbated by external events including a Royal Commission into the banking sector and the combustible cladding crisis.
There has been a 40% reduction in capacity from the Lloyd’s market alone. In the construction sector, this has led to large increases in premiums, reductions in the overall aggregate limit of insurance policies, limits on specific claims, and the application of “cladding exclusions”.
Cladding assessment and remediation
Private owners of Class 2 (high rise residential) and Class 9 (aged-care, hospitals, schools) buildings must register their building with the NSW Cladding Taskforce if the building façade incorporates aluminium composite panels or insulated cladding systems.
Private owners of multi-storey buildings that require type A or B fire resisting construction and that were completed before 1 October 2018 were required to register their buildings with the Queensland Building and Construction Commission (QBCC) before 29 March 2019.
Owners of registered buildings that have been assessed as having non-compliant combustible cladding must obtain a fire safety risk assessment and remediation plan from a fire safety engineer and submit it to QBCC before 3 May 2021.
VIC, WA, SA, TAS
State government cladding taskforces are proactively undertaking identification and assessment of government and privately owned Class 2 (high rise residential), Class 3 (high rise commercial and hotels) and Class 9 (aged-care, hospitals, schools) buildings.
Buildings with non-compliant combustible external cladding are referred to the Local Council’s municipal building surveyor to issue building orders requiring owners to remediate.
BCA amendments and related reforms
Legislation in all States requires building work to be designed and constructed in compliance with the Building Code of Australia (BCA). The BCA was amended on 12 March 2018 (by way of an out-of-cycle amendment to the 2016 edition of the BCA) and again on 1 May 2019 (by the commencement of the 2019 edition of the BCA) to increase fire safety, further restrict the use of combustible materials on building facades and increase sprinkler protection. The Australian Standard for automatic fire sprinklers, AS 2118, was also upgraded in 2017.
Wider legislative reforms
Legislative reform in all states aimed at improving the effectiveness of building compliance and enforcement systems generally has overtaken and subsumed measures directed at improving fire safety and cladding issues.
Following the Grenfell Tower fire in 2017, the Building Ministers Forum (BMF) commissioned an independent expert examination of the compliance and enforcement problems within Australia’s building and construction system. A report by Peter Shergold and Brownyn Weir was delivered in February 2018. The report made 24 recommendations directed at the registration and training of building practitioners; improving supervision; auditing and expertise in the industry; and a need for better documentation.
In March 2019, the BMF prioritised six recommendations from the Shergold and Weir Report for development of a consistent national approach, which were:
- The registration in each jurisdiction of consistent categories of building designers and certifiers
- Nationally consistent qualification requirements for each category of building designer and certifier registration
- Better regulation of private building surveyors to minimise conflicts of interest and improve transparency
- Development of codes of conduct for private building surveyors
- Enhancement supervisory powers and mandatory reporting obligations for private building surveyors
- Better approval documentation to be prepared by appropriate categories of registered practitioners.
Most states have started introducing legislative reforms directed at the six areas that have been prioritised by the BMF.
Class actions against manufacturers
Two class action proceedings have been filed in the Federal Court of Australia against the two largest manufacturers and Australian distributors of Aluminium Composite Panels.
The first Court proceeding is against the German manufacturer and the Australian distributor of the “Alucobond PE” product, 3A Composites GmbH and Halifax Vogel Group Pty Limited. The lead plaintiff is the owners’ corporation for the Shore Dolls Point residential apartment building in Dolls Point, Sydney, which was constructed in 2011 and 2012.
The second Court proceeding is against the Australian distributor of the “Vitrabond PE” product, Fairview Architectural Pty Limited. The lead plaintiff is the owners’ corporation for the Solis Apartments residential apartment block in Warwick Farm, Sydney, which was constructed in 2014 and 2015.
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