AIBS Communique - Professional Indemnity Insurance Availability

AIBS is aware of a recent sudden tightening in the market for Professional Indemnity Insurance (PI) and members with policies now due for renewal may be unable to obtain a new policy without exclusions around external cladding specifically and NCBP generally.

In most jurisdictions this means that building surveyors or firms unable to obtain policies without exclusions may not be able to fulfil statutory requirements for registration and will need to cease undertaking statutory roles.

While AIBS has been concerned about the potential for this situation to arise and we have been monitoring it in consultation with our national insurance partner BRIC, we had anticipated that exclusion-free policies would still be available, albeit at an increased premium. However, just last week, BRIC advised AIBS that there has been a sudden and “seismic shift” in the insurance market around PI insurance for building professionals, with building surveyors among the hardest hit.

This communique is to inform you that we are aware of the critical nature of the problem faced right now by many members and what we are doing about it.

What AIBS is doing
This week, AIBS has contacted all Building Ministers in all jurisdictions via formal letter and informal approaches to the Ministers and their senior staff both within Ministerial offices and in their relevant departments. The initial aim is to alert the Ministers to the issue and its critical and urgent nature.

In Queensland, the response to the news was immediate with the Minister acknowledging the need to address this issue as quickly and efficiently as possible. AIBS has held discussions with senior members in the department and they are now well aware of the issue. In Victoria, we are aware the Minister has called for his department to provide an urgent briefing on the matter. We are continuing to work with government in these and other jurisdictions.

AIBS has advised governments to allow registration of all practitioners with exclusions in their PI policies as an interim measure so they can continue to work. However, we are very aware that the presence of exclusions in insurance policies is most unsatisfactory for both the building surveyors concerned and for the general public.

We believe that this reaction to the cladding issue by the insurance industry is a knee jerk reaction that will achieve very little other than to potentially cause chaos in the building industry and threaten the livelihood of some industry professionals. New exclusions in new policies will not mitigate past risks. Amendments to Volume 1 of the NCC to address cladding fire risks that came into effect in March will significantly reduce the risk in future.

Therefore, we are strongly advocating for a better solution going forward and AIBS is now seeking to engage with governments, the construction and insurance industries to examine the issue in greater detail and to develop longer term solutions for the future. 

Advice for members
An excellent and informative document has been developed by BRIC in consultation with AIBS. It contains valuable information which you can find below.

And, as part of advice provided to Ministers, AIBS draws your attention to part of the BRIC information which says: 

“Professional Indemnity insurance operates on a “claims made” basis which means that it is the current policy that supports claims arising out of past and current work. Therefore, if an exclusion is applied from renewal, that exclusion will apply to any claims made after that renewal no matter when the work was done, unless the insurer has already been told about that specific circumstance.”

Therefore, it is important for members who are unable to obtain new policies without conditions or exclusions to do all you can to identify and notify your insurers of any potential claim that may arise in the future before your current policy expires.

If you are in this situation or unsure, it might be worthwhile seeking independent legal advice to assist you to understand the notification process and ramifications.

AIBS will continue to work with governments in all jurisdictions to address the current issues and how it can be dealt with in the future, but our immediate concern is to ensure those building surveyors faced with losing their business, are able to maintain their registration and continue to practice.

AIBS has been warning for some time that this issue with PI insurance was looming. In April 2018, AIBS issued a statement which can be found below. The statement contains a number of recommendations for the short, medium and long term.  Given the current crisis and the change in the 'landscape', AIBS will now review these recommendations and advocate them to government with the aim of achieving a more stable building regulatory system and providing an acceptable level of cover for consumers and building surveying professionals.  

If you have any concerns or comments, please do not hesitate to contact me.

Brett Mace - MAICD
Chief Executive Officer