Ligitation on the risk in Australia

Litigation on the rise in Australia

Stirred into action by Grenfell and their own high-rise fires, Australian authorities are piling more responsibility on the construction industry.

In mid-May, a year-long enquiry in Queensland found that flammable cladding may have been used on as many as 12,000 buildings in the state. Nearly 50 buildings are under investigation, including several hospitals. In Victoria, an audit of 170 buildings established that 51 per cent of high-rise buildings failed to comply with the building code. And in New South Wales, 58 high-rise residential buildings with aluminium cladding are also under investigation.

As a result of these sweeping audits, legal reforms are being introduced that are putting pressure on builders and owners, reports law firm Gilchrist Connell, a specialist in insurance. In New South Wales, for instance, new laws empower the government to order rectification work at owners’ expense and impose penalties. Further, considerably more onus is placed on owners of clad buildings in other ways, for instance to produce reports confirming the cladding used does not present any risks.

As in the UK, the findings increase the exposure of landlords, owners and other responsible parties to claims and penalties. “Insurers will have seen – and can continue to expect to see, an increase in claims for investigation and representation expenses,” warns Gilchrist Connell. “There has been a spike in litigation against engineers, architects, builders, surveyors, valuers, certifiers where minimum [building code] standards have not been met.”

Simultaneously, insurance premiums for owners of non-compliant buildings have shot up, with some buildings deemed effectively uninsurable. In a direct consequence, underwriters in Australia have started to write exclusion clauses relating to combustible cladding. “Brokers will no doubt now arrange more vigilant inspections and investigations of buildings owned by large insureds,” predicts the firm.

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