Australian home builders have taken their fight against builders’ warranty insurance to the Supreme Court of Victoria.

A writ in the name of Builders Collective of Australia (BCA) President Phil Dwyer and his wife Elizabeth was issued last week against liquidated insurer HIH Insurance.

Owners of some of Australia’s largest home building companies have bankrolled the legal challenge in a show of opposition to insurers’ demands for securities or indemnities in builders’ warranty insurance.

The writ alleges HIH Casualty and General Insurance acted unconscionably in 2000 by forcing Mr Dwyer to provide an indemnity. The writ claims the action reduced the insurer’s contingent risk to nil.

It also alleges Mr Dwyer, who was a building company director, was forced to act as his own reinsurer.

A Victorian Essential Services Commission report issued in September revealed 44% of builders are required to pledge security or indemnities to obtain warranty cover, which is compulsory in most states.

Insurers have previously told insuranceNEWS.com.au that indemnities are not used in most cases.

On Friday Mr Dwyer told insuranceNEWS.com.au that BCA members committed in June to proceed “with legal action to determine the legality and enforceability of the deeds of indemnity, bank guarantees and securities demanded by the insurers as a condition of eligibility for warranty insurance”.

He claims a successful case would create a precedent and “open the floodgates” over indemnity issues.

Mr Dwyer’s lawyers chose the HIH indemnity because the liquidated company is viewed as a preferable defendant to insurers that are still active within the builders’ warranty market.

A spokesman for HIH liquidator McGrath Nicol declined to comment.