Ross Greenwood speaks to Queensland Building Construction Commission Deputy Commissioner Philip Halton as a change in law in Queensland will allow certifiers to continue to work with professional indemnity insurance but it will exclude combustible cladding.
Ross Greenwood: For the past few weeks we’ve been explaining to you what I think is applied in the building industry right now. Now this has come as a result of not only the horrendous fires that you saw in Melbourne, for example, fires, the La Crosse building going back to 2015 in Victoria, in LaTrobe Street. The other one the Neo 200 building in Spencer Street earlier this year, but there have been other fires in other parts of the country and of course nobody can forget the Grenfell fire in the center of London. Now the whole point about this is it’s not the only issue when it comes to buildings right now.
The Opal Tower in Sydney, the cracking in that building at the beginning of this year, it clearly was a significant test for the industry because it’s not good for owners, it’s not good for the people who are renting apartments and then you come on to the Mascot Tower that has caught the headlines in the past few weeks, but as we’ve talked about building standards, as we’ve talked about all these issues, one issue has come very much to the forefront of our attention and that is about professional indemnity insurance for many of the certifiers and surveyors, architects who go out and create and make certain these buildings are right.
The reason why they are so important, why this is so important in some parts of Australia you require professional indemnity insurance to be able to work, but the problem as we’ve heard from the Institute of surveyors in the past few nights is the last insurer of this industry has basically walked away from Australia. Anybody now who suddenly has a new insurance policy set for renewal has either, number one, in these past few weeks got a massive shock.
Remember we told you somebody who’d had their bill increase from $18,000 to $221,000 and others who simply can’t get the insurance, but remember for them it’s a legal requirement to have that insurance. Today, the Queensland Government appears to have stepped in while they’re trying to change laws in this regard. The Queensland Building and Construction Commission has given assistance in particular to certifiers who are facing insurance difficulties right now. Help me explain all this, the deputy commissioner of the Queensland Building and Construction Commission Philip Holton is online. Philip many thanks for your time.
Interview with: Philip Halton, Deputy Commissioner, Queensland Building Construction Commission
Philip Holton: Pleasure, Ross.
Ross Greenwood: Okay, I’ve tried to set that up for people to understand it and see where it’s up to but this really has become a crisis for many people in the building industry as I can see it.
Philip Holton: No, that’s right. It’s been a real worry in industry in Queensland and many other states. You cannot build a structure whether it’s an ordinary house or a high rise tower without a building certifier, in other cities they call them building surveyors signing off at the end of the construction process that the building’s been properly constructed.
In Queensland like several other states it’s a legal requirement that a certifier who holds a license from government must have professional indemnity insurance. As you’ve described the insurance industry has been re-evaluating how comfortable they are offering comprehensive PI insurance to certifiers. Certifiers were facing a real problem.
Ross Greenwood: Okay, just explain to me because in this particular case you’re effectively allowing them to operate with professional indemnity insurance which contains exclusions in relation to combustible cladding. Just explain that to me.
Philip Holton: What’s happened in the last 24 hours is the Queensland Government so we should take this as a decision of the government, the government has emphatically said they’re going to do two things. One is they’re going to impose the strictest band that we’ve ever had in Queensland about the use of combustible cladding on any new building project happening anywhere in Queensland and because they intend to eliminate this product from any prospect of being used on new buildings in Queensland in the future.
They’ve said to the certifying profession we will still require you to have professional indemnity insurance, but we will allow you to have professional indemnity insurance with a carve out, an exclusion that says the insurer is not going to cover you for cladding. They’ve only taken that decision because they intend to eliminate future use of cladding.
Ross Greenwood: Okay, just another aspect of this. If I move a little bit to the side of that, now the cladding is clearly a significant issue and catastrophic fires are something that no person, nobody in the building industry, no owner, no government can obviously tolerate. I totally get this, but there’s clearly also issues of quality of build. This comes down to things such as the Opal Tower such as say the Mascot Tower issues that we have seen there. Where does it sit? Because as I understand it is another reason why some of these insurers are becoming shall I say wary at least of the Australian construction industry and of insuring these certifiers.
Philip Holton: Yes, that’s right. The government commissioned PricewaterhouseCoopers to do a quite thorough report on what’s happening in the insurance industry, and for listeners who have a real appetite for this, the government’s published that report on the website. The report told government that some insurers have simply decided not to offer professional indemnity insurance.
Some people, some insurance companies have left the market. They do other things. There are insurers who will still offer professional indemnity insurance to certifiers, but they are insisting on an exclusion clause that cladding is too hot to insure. The government has responded by saying it is too hot to insure, it’s too hot to use, but if we eliminate the use we can then have an arrangement where certifier can keep working providing they have insurance for everything else they do.
Ross Greenwood: Okay, in other words what you’re saying is that they are prepared to take the risk on the quality of the construction. They’re prepared to take the risk on all those things, but cladding is really the no-go zone because that’s where really I guess their risk and their potential payouts could skyrocket even if there is a catastrophe and particularly one that involves human life.
Philip Holton: Now that’s what we’re seeing in the insurance market. That’s right. It’s a very balanced decision from the government to say, “We’ll eliminate the product and therefore we hope to eliminate the risk.” The government announced they’re going to make laws to that effect. Today the QBCC made some announcements to certifiers about how we’ll manage the transition so we can say to the certifiers, “You can continue to stay in business.”
Ross Greenwood: Okay, good. The second part about this is do you believe that this circumvents the prospect that the building industry effectively grinds to a halt as these certifiers were unable to gain the insurance that they required to carry out their job.
Philip Holton: Yes, in Queensland it absolutely does. We’ve written to every single licensed certifier who works in Queensland today. Most of those certifiers live in Queensland. We have a few certifiers who live in the Northern Rivers of New South Wales who come over to work in the Gold Coast. We have said to them definitively, “You can continue to work in Queensland. No Queensland certifier needs to stop work, needs to surrender their license as a result of what’s happening in the insurance industry.”
Ross Greenwood: Okay, now as you’re aware on a national basis the minister there is trying to get all of the various state counterparts together to try and work, not only on the national code which is already there, but to address some of these issues. Is this one of the solutions potentially that could be put to some of those meetings of those state by state ministers.
Philip Holton: Look, at the QBCC we’re the state regulator, so we didn’t attend those meetings. I probably can’t offer you a crystal ball. I imagine that this and other ideas will be on the table.
Ross Greenwood: It’s going to be an interesting thing, but at least there is a solution there for the Queensland Building and Construction Industry that could very well be taken up in other states I might suggest. Can I just say to the Queensland Building Construction Commission Deputy Commissioner Phillip Holton, I appreciate your time here on the program’s evening.
Philip Holton: Thank you, Ross. Good to be with you.
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