Insurers could be hit with new claims from NSW apartment owners following the passage of a law this month to reform the troubled building sector, Wotton + Kearney has warned.

The Design and Building Practitioners Bill 2019 contains a “new statutory duty of care” provision that operates retrospectively, applying to all new construction and buildings less than 10 years old, as well as works that have been carried out before the bill’s commencement.

This means claims can be made for breach of the new duty of care for defective buildings and currently litigated claims can be amended to include a new claim for breach of the new duty.

Design professionals such as architects and engineers insured under professional indemnity (PI) insurance policies may soon be subject to direct claims from owners.

“This is a significant change in the legal landscape that will have immediate effect,” the law firm says in a report. “Insurers could see claims for breach of the new duty soon after the bill is assented to – this could be within the next few months or weeks.

“This is not an insignificant risk. Many industry commentators advise against the purchase of apartments in new high-rise developments.

“Well over 100,000 of these high-rise apartments have been built in Sydney alone over the last five years.”

The inclusion of manufacturers and suppliers of building products in the definition of “construction work” is also likely to lead to a rise in claims under general liability policies, the law firm says.

“The risk profiles for construction professionals has increased. This will prompt many insurers to reassess their underwriting guidelines. The obvious question is how that will play out in the insurance market. Any increased risk will need to be priced.”