Victoria's new first resort DBI Insurance Scheme raises questions

At present, DBI insurance can only be claimed against to cover defects of a homeowner if a builder has died, disappeared or insolvent (a trigger event).

The new regime proposed for Victoria is a first resort scheme. Meaning a claim can be made upon the existence of defects and not requiring a trigger event.

Whilst this is great news, a number of questions beg:

1. What will be the limit of cover? The $300,000 has proven inadequate in many cases when a builder went under.

2. DBI insurance costs have already skyrocketed - what will be done to address this?

3. What will the new dispute resolution process involve? Will it be fast, fair and cost effective?

4. What oversight of DBI insurance will exist? If insurers debate claims routinely the new scheme will have limited benefit.

I have to laugh when I read the article ‘Huge step’: Victoria repairs crumbling builders’ warranty scheme which says that - because the scheme is last resort it is …”forcing many to pursue costly and lengthy legal action to secure rectification of defects”.

COME ON! Do you really believe that suddenly insurers will just start paying the very same claims that builders wouldn’t!?

Yes - first resort helps but it is no panacea for a slow and costly dispute resolution process.

If the $300,000 limit remains - many claims will exceed this!

Homeowners will still be forced to pursue costly proceedings unless the dispute resolution scheme is efficient and effective.

AND I emphasise from experience - insurers won’t just ‘roll over’ and pay claims without obtaining their own experts and undoubtedly debating costs.

Consider this, at present, both plumbing insurers (under a first resort scheme) and also VMIA (even if there is insolvency) don’t just pay a claim because defects exist. In fact these claims can be drawn out, difficult and require proceedings.

Why?

The current implied warranties granted to homeowners by builders under section 8 of the Domestic Building Contracts Act are routinely denied by builders for various reasons. Eg, the alleged defect is denied or the cost of rectification is denials.

Undoubtedly, insurers won’t just pay claims because there are defects in a dwelling. They will take up the mantle of builder denials.

The big questions are:

• What is the new dispute resolution scheme going to look like? Is it low cost and fast/efficient?

• What oversight of insurers will exist?

At present the DBDRV process does not order damages.

There is a suggestion a new rectification order will be created for a builder to rectify defects. But what if the owner has lost confidence in the builder? This is a routine issue. Say the builder has returned to correct defects and made the issue worse. I have seen this many times.

Many questions still need to be addressed.

Last of all…what help is there for those suffering the current system…

This article is a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Tagged as:

• property disputes