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NSW passes legislation to expand construction PI pool

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Designers and building practitioners in NSW will need to be registered and hold adequate professional indemnity (PI) insurance following the passage of a bill that forms part of the Berejiklian Government’s efforts to reform the troubled construction sector.

The Design and Building Practitioners Bill 2019 has seen a lack of support from the Insurance Council of Australia (ICA), which warned previously that the proposed legislation will do little to improve the insurance crunch facing the industry.

A final report last month from the Public Accountability Committee also criticised the Bill and urged the Government to instead develop appropriate risk products in consultation with insurers before legislating it.

But certifiers and building industry regulation expert Bronwyn Weir, joint author of the Building Confidence report, have welcomed the Bill’s passage, saying it will ease the insurance problem by spreading the risk across a bigger pool of insureds.

“Central to ensuring the operational success of the Bill will be the development of robust and thorough associated regulations, which establish professional indemnity insurance requirements for these newly registered practitioners,” Association of Accredited Certifiers CEO Jill Brookfield told today.

“We will work with the Government to ensure these regulations achieve this and more fairly spread liability across the entire industry to ensure all practitioners are accountable for their work.

“If we get this right, we can expand the professional indemnity insurance pool and make the insurance market more affordable for everyone.”

Insurers have stopped providing exclusion-free PI to the building industry in response to the cladding crisis and other quality control problems plaguing the sector. Many PI policies now come with huge excesses and premiums as well as a range of exclusions, reflecting the industry’s high-risk status.

Ms Weir says the Bill responds to the recommendations made in the Building Confidence report, and should therefore have the support of the insurance industry.

“The insurance industry has said that they would like governments to implement those recommendations [in the Building Confidence report],” Ms Weir told today.

“I don’t see any reason why the insurance industry wouldn’t welcome the opportunity to have registrations across a broader range of practitioners to help disperse liability and proportionate liability.

“One of the issues of insurance is that in the construction chain not everybody was registered. By creating registration, you would expect the insurance industry to respond positively to that because they will now have insurance spread across more people and the spreading of risk.” reached out to ICA for comment, and will provide updated information when it is made available.