Construction underwriter Mecon Insurance has launched a professional indemnity policy to cover builders against design flaws caused by subcontractors.

The policy will give cover for builders against legal liability for actual or alleged design flaws by subcontractors. It will cover the builder’s costs if he takes a subcontracted engineer to court with a subrogated claim for construction design flaws, or for damages actions against the builder if the subcontractor has ceased trading.

Mecon CEO Glenn Ross says 45% of buildings that fail are because of design issues.

“Defective design risks aren’t fully catered for in the material damage and public liability covers obtained by most builders, leaving them exposed to litigation for defective design and/or the vicarious liability of subcontractors and consultants engaged from time to time,” he said.

Builders can also choose to add options for unforeseen pollution, claims by employees, proportionate liability, novated designs, employee dishonesty and breaches of environmental professional services.

The NSW Government’s draft bill to reform the construction industry says design practitioners have to be “indemnified by insurance that complies with the regulations against any liability to which the design practitioner may become subject as a result of making the declaration or carrying out the work”.

However, Engineers Australia says the draft makes no mention of requiring engineers to be registered, and the gap has to be addressed.