Domestic Builder Insurance: When can you claim on it?
By Jennifer Barry, Lovegrove Solicitors
There are three scenarios in which owners can make a claim under their domestic builder insurance. If none of the three scenarios apply then owners will need to take action against the builder, often in the Victorian Civil and Administrative Tribunal (VCAT), to seek damages for rectification of defective works.
When can you make a claim under domestic builder insurance?
In order to claim under domestic builder insurance the builder must be either dead, disappeared or insolvent. Whether any of these three scenarios apply may not always be as easy to discern as you might expect.
he most straightforward of the three scenarios is when the Builder has died. This is, generally, easy to prove as there should be a death certificate to prove that the Builder has died. It may be more complex when the builder dies overseas or when the Builder named on the insurance is a company and it is the director of the company who has died. If this is the case, then it is essential to seek advice from an experienced construction lawyer for assistance in confirming that the Builder has died and about then making a claim to the insurer.
The second scenario applies when the Builder has become insolvent.
What constitutes insolvency for the purpose of making a claim on domestic builder insurance?
‘Insolvent’ is defined in the Domestic Building Insurance Ministerial Order as:
- For a natural person, insolvent under administration as defined in the Corporations Act 2001; and
- For a corporation, subject to external administration under the Corporations Act 2001.
This is also generally an easy scenario to prove as it will be possible to obtain company searches to prove that a builder that is a company has become insolvent or to obtain records demonstrating that an individual has gone bankrupt.
It is not always straight forward though, as a building company may simply be de-registered rather than insolvent, with the natural person registered builder still able to be traced.
It is advisable to seek the advice of an experienced construction lawyer in these circumstances to assist with obtaining the appropriate evidence.
The final scenario is when the Builder has “disappeared”. This is the hardest scenario to prove as it may be difficult to demonstrate that the builder has actually disappeared rather than merely not being able to be contacted.
What constitutes disappearance for the purposes of making a claim on domestic builder insurance?
‘Disappeared’ has been defined in the Ministerial Order as “cannot be found after due search and enquiry”. However, there is no indication of what will constitute ‘due search and enquiry’.
Further, there is case authority, such as Kweifio-Okai v Vero Insurance (Domestic Building)  VCAT 751, which states that if the Builder fails to reply to correspondence, it may still be able to be ‘found’, and therefore would not be considered to be disappeared.
Are there any further limitations on making a warranty insurance claim?
It is also important to note that each individual domestic builder insurance policy will likely have a number of items which are excluded from coverage under the policy. This will generally include items such as fences, small cracks and similar items. These items will vary from policy to policy and it is important to check your policy prior to submitting a claim.
If you have submitted a claim that has been rejected on the basis that it is an excluded item and you disagree with the insurer’s assessment, it is advisable to urgently contact an experienced construction lawyer who can assist you with contacting the insurance company and, if necessary, applying for a review of the insurer’s decision in VCAT. Note that urgency is required as the Insurer’s decision will advise a finite period (generally 28 days) within which to apply for a review at VCAT.
Contact Justin Cotton, Partner of Lovegrove Solicitors, should you have any queries concerning domestic builder insurance.
03 9600 1643
By Jennifer Barry, Solicitor, Lovegrove Solicitors
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© Lovegrove Solicitor’s 2014