The Victorian Government has arranged $6.9 million professional indemnity (PI) insurance coverage for surveyors, project managers and other contractors carrying out the state’s $600 million cladding rectification works in affected high-rise buildings.

Cladding Safety Victoria, the agency overseeing the repairs, secured the exclusion-free cover through corporate insurance broker Lockton Companies Australia.

The 10-year PI cover kicks in after repairs works are completed and will provide indemnity for construction liability and contract works.

Cladding Safety Victoria says securing the PI cover means the state’s cladding repair program can progress as planned. A number of building practitioners had been unable to bid for the work contracts because of their inability to get exclusion-free indemnity insurance.

PI insurance providers have stopped issuing exclusion-free covers, including for defective cladding materials, in response to potentially costly claims.

“The Victorian Government will pay the policy premiums to make sure appropriate insurance coverage is available to all practitioners,” Cladding Safety Victoria says in a statement to insuranceNEWS.com.au.

“This means that project managers, fire safety engineers, architects, building surveyors, contractors and subcontractors will all have protection under the program-wide policy.

“Critically, owners will have recourse to insurance if a claim is necessary down the track.”

Cladding Safety Victoria says repairs are currently taking place in more than 70 buildings and aims to have the number raised to 200 by the end of June. It has already completed repairs in 11 buildings.

Lockton says the arrangement, underwritten by "a group of global insurers and reinsurers", is a “market first” for the construction sector.

“This represents a milestone achievement in the midst of a very challenging construction insurance market where cladding exclusion free PI insurance coverage has been unobtainable for a number of building practitioner segments including fire engineers, building surveyors, architects and quantity surveyors,” the broker says in a statement to insuranceNEWS.com.au.

Meanwhile, certifiers have voiced concerns at proposed PI insurance requirements for NSW building and design practitioners.

They say the proposals as set out in the draft Design & Building Practitioners Regulation Act do not go far enough. Design and building practitioners must have “adequate” PI insurance but what is “adequate” will be decided by the insureds.

The Regulatory Impact Statement for the Act, which is set to commence on July 1, says the position “is designed to recognise that different practitioners will have very different business risks, which will affect what cover is right for them”.

However the Association of Australian Certifiers (AAC) sees it differently.

“It is crucial that all newly registered building and design practitioners will be covered by a robust insurance regime, which protects consumers if something goes wrong with a development,” CEO Jill Brookfield said.

“For far too long, these practitioners have been able to operate in NSW without being properly registered or covered by professional indemnity insurance which has exposed consumers.

“The regulation under development must ensure these practitioners are covered by the right level of professional indemnity insurance from the commencement of the regulation.”

AAC VP Robert Marinelli says the NSW Government should “stipulate a minimum” level of PI cover that other practitioners must hold.

“It needs to be a minimum and it needs to be reflective of the responsibility that they take,” he told insuranceNEWS.com.au today.