Property Developers Exposures and Risks

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Professional Indemnity
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Building industry professionals, including house construction businesses play a pivotal role in the construction of safe, fit-for-purpose and compliant buildings/structures. Therefore, there is a significant Professional Indemnity exposure (e.g. negligence, misrepresentation, inaccurate advice,  failure to perform etc ) for this occupation associated with claims for bodily Injury, property damage and financial loss arising out of an error or omission in design, consultancy , professional advice, selection/recommendation of materials (e.g. non-conforming/non-compliant materials), contract administration, and project management and specification. Use of certain materials in the past as well as in the future (e.g. aluminium composite panels (ACPs), Other combustible facade materials etc), which may cause the design/material/construction work to be non-conforming/compliant with the building codes and not fit for purpose will lead to serious claims/avenues of legal recourses. Construction industry professionals are responsible and need to ensure that cost management does not compromise the performance of the selected building materials. They should also ensure that certificates demonstrating the compliance of purchased and installed materials comply with the certification documents/approved building plans and specifications. Following any failure/breach, claims could be substantial. Furthermore, the costs of defending a claim have escalated to the point where defence legal costs are regarded as a worse risk than the claims themselves.

Larger scale operators increasingly rely on finance packages and special house/land deals to attract potential customers and also the provision of financial services to prospective customers gives rise to further exposures.

Other potential PI exposures, especially in relation to advice/application/use of non-conforming/compliant building materials (in the past as well as future) to be considered include:

• Residual fire risks associated with buildings which are not remediated, new projects involving the use of non-compliance materials (combustible ACPs), potential liabilities arising from new advice provided in relation to building audits, remediations work etc;
• Typical claims made basis cover - PI insurers are exposed to both the potential ‘historical’ liabilities of building industry professionals, along with liabilities developing from building remediation works and new projects;
• Uncertainty of potential liabilities from past advice - the number of buildings affected and the level of non-compliant use of non-conforming/compliance materials (e.g. combustible ACPs) is unknown. Also, the extent to which building owners may pursue various routes of legal recourse against the building contractor/professionals is uncertain;
• Businesses that has, or has had, large projects, is going to find it increasingly difficult to obtain PI insurance. This is because  PI insurers are trying to limit their exposure against future claims/liabilities  (e.g. declining to provide PI insurance cover for building professionals who have advised on the use of combustible ACPs in the past , placing explicit and broad exclusions relating to combustible ACPs ,  significant increases in premiums, significant increases in requirements for disclosure of past projects , general tightening of other policy limitations, etc). Generally, insurers are seeking to using policy limitations and exclusions to limit their exposure;
• Potential liability face by the building industry professionals for past advice is uncertain and PI insurers appear to be making ‘worst case’ assessments of their exposure;
• Each geographical district/estate is unique in their approach and requirement to have PI insurance for building industry professionals, with some districts / estates have very strict requirements. Also, in some geographical locations building industry professionals are required to have PI insurance without exclusions (e.g. in relation to combustible claddings) to obtain a licence from the relevant authority/ to register with their professional body – this is another major issues/concern for building industry professionals.

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Product Liability
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Product Liability, Product Recall, Product Guarantee, Extortion, Kidnap and Ransom

The exposure for this class is high. Although claims will be rare, they could be severe. Because the principal contractor is responsible for inspecting and approving all the work that goes into a project, they may be held responsible for a wide range of problems that can develop with a completed structure, including those arising from errors made by subcontractors. The main risks include:

a) the use of non-conforming/non-complaint or lower-quality product or materials;

b) not following specifications or building codes, and

c) defective work.

To reduce/control such exposure, contractors should always ensure that the products or materials supplied and installed are conforming/complying with the relevant standards/laws and what is nominated in the approved plans and specifications. Although the insured typically will not be held liable for unknowingly using faulty or defective materials (claims will probably be directed at the manufacturer), it is likely that the insured could incur substantial legal defence fees if the insured or a sub-contractor performs work using such materials.

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Risk Description
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This risk class consists of businesses which mainly construct houses (excluding multi-unit apartments and townhouses) or those that perform alterations, additions or general repair services to existing houses. It also includes operators who organise and manage these activities as the prime contractor.

The primary activities of this industry are:

• House construction
• House alterations, renovation and general repairs
• Prefabricated house on-site assembly, erection and installation
• Project management

The major products and services in this industry include:

• New housing construction
• Housing repairs and maintenance
• Alterations, additions, renovations and improvements to existing houses

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Why use Hunter Broking Group?

Property Development Insurance Broker Brisbane:

Hunter Broking Group can assist with Property Development Insurance & Construction Equipment Insurance. Through industry specific insurers, your designated advisor has access to a comprehensive range of insurance products that can be tailored to suit most developments and projects. We can arrange insurance for various segments in the property development industry including:

• Residential Developments
• Public Housing Projects
• Apartments
• Small Unit Developments
• Commercial Developments
• Industrial Developments
• Civil Developments
• Multi Unit
• Strata Title 

Hunter Broking Group pride themselves on having a local presence with a national strength, our technical product experience allows us to manage and service property development insurance products such as:

• Professional Indemnity Insurance (site supervisors, consulting, design)
• Public Liability Insurance
• Construction Equipment Insurance
• Property Insurance
• Strata Insurance
• Employers Liability (non government states)
• Contract Works Insurance / Contractors All Risks Insurance
• Environmental Liability Insurance
• Management Liability Insurance

Construction equipment is a core focus for our advisors, whether we are looking after elevated working platforms or large concrete boom pumps, Hunter Broking Group have the experience to provide the appropriate advice for your size and risk exposures.

Our experienced brokers can help you get the most appropriate insurance cover by assessing your specific needs and recommending the best value insurance solution for your business, whilst still maintaining the highest standard of cover.
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Information Sources

https://www.lmiriskcoach.com/industries/19452/hazard-index
https://www.lmiriskcoach.com/industries/19452/risk-assessment

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