The Building and Plumbing Commissions Built In Conflict of Interest

Conflict of interest for the Building and Plumbing Commission (“BPC”):

Recently, we have seen substantial regulatory change in Victoria in relation to domestic building law.

One of the main changes is the amalgamation of:

• The Victorina Managed Insurance Authority (“VMIA”); and
• the Victorian Building Authority (“VBA”); to be now
• the BPC.

Why is this so material?

Well, when it comes to insurance the very body that cancels builder registrations is also the body that pays out on their claims.

AND those claims are only paid out if the builder goes under…otherwise known as:

Dead, Disappeared, or Insolvent. (“Last Resort”)

Yep, it is the last one that is relevant - Insolvent!

See, many builders are companies and when companies can’t trade and can’t pay their debts as and when they fall due they go insolvent. If their building registration is cancelled it is almost inevitable.

And what does that mean? A domestic builders warranty insurance (“DBI”) claim can be made.

But how can we find ourselves in circumstances where the BPC is both financially conflicted by the inevitable wind up of cancelling a builder’s registration?

Let me explain:

• there is a new insurance scheme in Victoria called ‘First Resort’ insurance;
• it differs from Last Resort in that you don’t need insolvency to claim;
• but the ‘Last Resort’ certificates are still valid until 2032;
• and the new regulator is administering the insurance claims for both the new and old schemes.

The BPC for the next 6 years on these run-off policies has a financial interest in the builder staying on their feet.

You might say - GREAT! We need more builders… this is good.

BUT - let me tell you, these are not ordinary builders, the ones facing disqualification or cancellation are the worst of the worst for a reason. We need them out of the industry whether they cause more DBI claims or not.

AND whilst the BPC wants to clean up the industry, and for all intents and purposes thus far appears to be doing exactly that - but how can it be right that it be financially interested in the opposite…?

The question begs…

Why didn’t we get an independent body to handle the run-off claims at the BPC, the ‘Last Resort’ scheme really should be managed by a body separate to BPC!?

As Victorians interested in the success of our building industry, we need to be acutely aware of insurance arrangements. Boring for some I know. But this is where the real differences to consumers are made. DBI and plumbing insurance.

It’s not too late for the BPC to outsource this important run off insurance management function to an independent body.

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

Tagged as:

• regulatory compliance
• insurance law
• building law
• building disputes