Building product failures are having ramifications for insurance covers beyond professional indemnity (PI), Arthur J Gallagher Practice Leader Construction Angela Vella says.

“We have issues arising in the general liability space, and we have issues arising in the construction space,” she told the Australian Professional Indemnity Group (APIG) conference last week.

Much of the building crisis focus has been on surging PI premiums and problems for certifiers and other providers in obtaining cover, but Ms Vella says the industry is also grappling with wider issues around contracts and various covers.

She says past soft market conditions have fuelled problems as insurers relaxed their underwriting and broadened policy wordings as they competed for market share

“What hasn’t helped is we have been in a soft insurance market for an extended period,” she said. “Broadened cover through such a soft market has encouraged more claims.”

The prevalence of “phoenix” builders and contractors, which go out of business before resurfacing elsewhere, has been a major issue during the recent building boom, she says.

“They walk away from liabilities and leave people...exposed and they are not held accountable,” she said. “It is staggering.”

Association of Accredited Certifiers CEO Jill Brookfield told the conference a NSW Fair Trading building bond scheme introduced last year has proved ineffective in combating the problem so far.