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Victoria cladding talks may resolve PI gridlock

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Professional indemnity insurance cover without a cladding exclusion may again be offered to building practitioners in Victoria pending the outcome of talks between the insurance industry and the State Government.

The ongoing “close negotiation” is focused on the pilot remediation program for 15 high-rise buildings that have been listed as being in most urgent need of cladding repairs, according to Insurance Council of Australia GM Risk Karl Sullivan.

“They have engaged professional indemnity insurers to get them to try to write a product specifically for each one of those projects,” Mr Sullivan told a NSW building inquiry last week.

“It is a big challenge. It is one that Victoria is trying to solve through their process of having a very clear and concise remediation program and standards.

“[There] is no guarantee that it will happen, but it is the only state with a standard that the insurers are actually engaging with at a state government level – to consider if they will reintroduce cover without the exclusion.”

The outcome of the talks will boil down to whether or not insurers are comfortable with the cladding repair work planned for the 15 buildings.

“It comes down to the technical specifics of the remediation program – products, design, execution and compliance,” Mr Sullivan said.

“If the standards meet insurers’ requirements in Victoria for those 15 pilot programs, then some insurers may consider those standards are acceptable.

“Once those 15 are done – if they are done – then you might see adoption of those standards more broadly.”

Governments at the federal and state levels have been trying since July to find a way out of the professional indemnity stalemate in the building industry.

The Victorian Government has undertaken “a great deal" of proactive engagement with the insurance industry to address the cladding defects problem, Mr Sullivan told the NSW inquiry.

He urged the NSW Government to consider following Victoria’s example as part of its efforts to resolve the months-long insurance crisis in the building industry.

“That is the first thing I would like to see in NSW,” Mr Sullivan said. “I would advocate that the State Government needs to implement a very clear remediation protocol and regime and a clear set of standards that need to be met.

“That would assist the insurance industry to recognise that if someone undertakes that work they are operating within a very clear regime and the opportunity for them to fail in their professional requirements is quite narrow.”