Insurance for domestic building work
Wednesday, 10 December 2014
Building surveyors who don't check a builder's insurance details before issuing a building permit for domestic building work may expose themselves to huge financial risks.
The Building Act 1993 (the Act) requires domestic builders to be covered by domestic building insurance when carrying out work valued at more than $16,000.
Building surveyors must not issue building permits for domestic building work costing more than $16,000 unless they are 'satisfied' that the builder carrying out the work is covered by the required insurance. Before a building surveyor can be satisfied that the builder has the required insurance cover, they need to confirm that the builder named in the domestic building contract is the same as the builder listed on the insurance certificate.
The Victorian Civil and Administrative Tribunal (VCAT) ordered a building surveyor to pay damages of $60,000 to a homeowner in 2013 after it found that he breached his duty of care to the owners by issuing a building permit when there was no valid insurance policy in place (Elturan v Unicon Property Group Pty Ltd & Ors [Domestic Building] VCAT 924). Although the building surveyor was provided with an insurance certificate, the builder named in the certificate was not the builder who carried out the work. VCAT found that the insurance policy was therefore not valid and the homeowner couldn't make a claim for incomplete and defective work. It determined that the building surveyor and the directors of the building company were responsible for the owner's lost opportunity to make a claim against the domestic building insurance.
Builders need to provide accurate insurance details
Domestic builders must ensure they provide the relevant building surveyor with a valid certificate of insurance that includes the correct details of the builder who will be carrying out the work. The builder named in the contract with the owner must be the same as the name of the builder listed on the certificate of insurance. Alternatively, the building surveyor must be provided with evidence to show that the builder and building work is covered by the required domestic building insurance.
Providing false insurance information to a building surveyor is an offence under section 246 of the Act.
Check the details before issuing a building permit
Before issuing a building permit for domestic building work, the VBA recommends building surveyors ask for a copy of the relevant parts of the written contract to check that the name of the builder matches the builder named in the insurance certificate. Keeping a copy of these documents on file will also help the building surveyor demonstrate that they were satisfied a valid insurance policy was in place before they issued the building permit.
If the name of the builder (which may be a company, trading name or individual) in the written contract is not the same as the name of the builder listed on the certificate of insurance, the building surveyor should seek further evidence from the builder that they are covered by the required insurance before they issue the building permit.
The VBA also recommends building surveyors ensure the site address listed on the certificate of insurance matches the address for which the building permit is sought. This can be an issue where the building work involves unit developments or subdivisions.
Ensuring all the details in the insurance certificate match the domestic building contract is an important step for the building surveyor to take – as well as confirming that the work is covered by the required insurance, doing so will help protect the building surveyor from potential liability to the homeowners.