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Berkshire Hathaway Specialty Insurance

Victoria will expand its PI cladding exemption

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Victoria will next month allow all classes of engineers and other building professionals to temporarily operate with cladding exemptions on their professional indemnity (PI) policies.

The temporary measure is aimed at averting a potential shutdown of the state’s construction sector, which like the rest of the country has been caught up in the fallout from the PI crisis.

A PI cladding exemption has been in place since last July for the state’s building surveyors and inspectors, who must hold such cover without any restrictions.

Insurers have stopped providing condition-free PI policies in a bid to limit their exposure to the large number of quality-related problems in the construction sector. The insurance problem came to a head last July when London-based Landmark - the last issuer of policies with no restrictions attached - pulled out.

Victorian Planning Minister Richard Wynne says the latest measure is a “short-term fix” to the months-long PI problem that has also seen NSW and Queensland announced similar moves for building practitioners who are normally required to have exemption-free indemnity covers.

“We’re bringing other building professionals into line with surveyors and inspectors to ensure their registration isn’t affected and they can continue to work,” Mr Wynne says in a brief statement to insuranceNEWS.com.au.

“This is a short-term fix but professional indemnity insurance is a national problem and that’s why we need a national solution.”

The ministerial order signed by Mr Wynne will come into effect on February 15 and apply also to all classes of draftspeople, architects and quantity surveyors.

In a separate statement, the Australian Property Institute has unveiled what it says is an “innovative” approach to counter the PI crisis.

The “two-tier cap” approach within its professional standards scheme, which took effect this month, is designed to deliver certainty around insurance limits, the institute says.

The first tier of caps comprises seven categories that relate to “low risk” valuations of real property and carry little risk of being subject to legal action.

“These valuations will be subject to a liability cap of $1 million, the minimum currently possible for professional standards schemes,” CEO Amelia Hodge said.

A professional standards scheme, a legal instrument, caps the civil liability or damages that professionals who take part may be required to pay if a court upholds a claim against them.