Victoria's building warranty insurance reforms: A troubling conflict of interest
You’ve moved into your dream home and it’s riddled with defects.
You chase the builder, maybe even commence proceedings against them – only the builder’s now winding up and entering insolvency. Where do you go?
To your Domestic Building Warranty Insurance.
This is insurance that pays for your incomplete or defective works if the builder is dead, disappeared or insolvent. It applies to domestic building contracts of over $16,000 and has cover for up to $300,000 – but that’s only for the works. There’s no cover for legal costs and any cover for alternative accommodation is capped at 60 days.
The trouble with domestic building insurance is that the insurer can still fight you. There are time limits on making a claim (2 years for non-structural and 6 years for structural works) and insurers can argue that the claims weren’t made in time.
The newly proposed building legislation looks to make changes to that legislative scheme, namely by removing the requirement for the builder to be dead, disappeared or insolvent. It also raises the contract value requiring DBI to $20,000.
This might sound like a positive step, but there’s a big catch. The newly proposed Building and Plumbing Commission proposes the VMIA (which issues DBI policies) as sole insurer and to be a part of the same body including the regulator. There are clear conflicts here – how can a defendant insurer potentially who appoints lawyers to fight insurance claims and on the other hand be a part of the same regulatory body that proposes to protect consumers?
The devil will be in the detail on a lot of these matters, particularly once we start seeing the new legislation in practice but in our experience it seems incongruous that an insurer and a dispute resolution service can be rolled up into the same statutory regulatory body.
Consumers need change - but they need change that moves them forward.
This article is a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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