Section 93 of the Building Act 1993 (Vic) – Protection Works Insurance Contract
By Lisa Nguyen, Lovegrove & Cotton – Construction and Planning Lawyers
November 2014
Compliance under section 93 of the Building Act 1995 (Vic)
Under the Building Act, before any protection work is commenced in respect of an adjoining property, an owner must ensure the contract of insurance is:
- in force against damage caused by the proposed protection work to the adjoining property;
- in force against any liabilities likely to be incurred to the adjoining occupiers and general public during the works and for a period of 12 months after that building work has been
completed; - entered with an insurer for an amount agreed to by the owner and adjoining owner or in the event of a dispute, determined by the Board under Part 10 of the Building Act;
- given to the adjoining owner before the protection works begin; and
- renewed or extended during the carrying out of the building work and for 12 months after that work is completed;
Although Her Honour, Justice McMillian in the You’s case, held that “the period of cover of the insurance contract need not cover the entire duration of the building work,” the relevant subsection in the Act provides that the owner must give to the adjoining owner evidence of the renewal or extension of the contract of insurance.
The insurance policy contract
The contract between the owner and the builder would not normally have an impact on the protection works insurance contract if it was taken out by the owner and not the builder. The parties to the insurance contract would be the owner and the insurer and a change in builders would not impact on the contractual obligations of the insurance company to the owner and third parties who are able to claim against damage under the policy.
If the owner employed different builders to complete the building works, including the protection works, the owner must ensure that the insurance policy was in force during the entire period and the policy was not affected by the change of builders. The coverage must subsist for a period of 12 months after the protection works were completed.
If the builder took out the insurance policy for the protection work then the contract was not between the owner and insurance company. If the insurance contract is terminated, because the builder becomes either bankrupt or placed into administration or liquidation, then the Owner would not be able to rely on that insurance contract. This is so unless the owner has already taken out another protection works insurance policy contract with an insurer to cover the period as specified in the Act.
If the policy is still valid after the change of builders, the issue of whether parties who benefit from the contract must be identified was addressed by Her Honour Justice McMillian in the You’s case, who referred to the Insurance Contracts Act 1984 (Cth) which provides that those benefiting under the policy need not be named in the policy in order to be covered by the policy.
Although there may not be many insurers who offer contract of insurances that cover the broad “any liabilities likely to be incurred” claims, the owner must ensure that they comply with section 93 of the Act, namely that an insurance policy is in force, the amount was agreed to by the owner and adjoining owner, it has been served on the adjoining owners and that it covers the period of carrying out the protection works and 12 months after that work is completed.
