Most professional indemnity insurance policies have a cladding exclusion these days. We often hear – “I don’t specify cladding so it’s no issue for me” – however it’s important to note that not all policy exclusions are the same and many of these exclusions extend well beyond combustible cladding. You should always take the time to read your policy wording and schedule, as these combined documents are your actual cover should a claim arise. It is important to note that a “cladding exclusion” isn’t always in your schedule – it could be hidden in plain sight in the policy wording itself. The name of the endorsement or clause within the wording may also not be obvious or include the word cladding or similar words that stand out.
A “good” exclusion is very specific or narrow and will exclude claims relating to Expanded Polystyrene Panels (EPS) or Aluminium Composite Panels with a Polyethylene Core (ACPPC), or the exclusion may link the cladding exclusion to a product that is combustible. For most practices you can quickly and easily determine the projects where an EPS or ACP product has been used so your risk should be easily identified.
A “bad” exclusion will exclude cover for cladding or façade materials, by not specifying what they are, or even failing to address combustibility. Such exclusions could exclude cover for glass, cement, or timber cladding products. They may also exclude water ingress claims which are very common. Depending on your profession and the services you provide, this kind of exclusion may be acceptable for your business.
The down-right ugly
An “ugly” exclusion will exclude cover for any building materials, and then not specify what those are. A building material could be anything. Think about specification of floor tiles in a commercial kitchen which requires a higher slip resistance, or an impurity in glass panels. These are obvious building materials and if there is a claim you could be un-insured. We don’t consider this type of exclusion acceptable to any construction or design professional.
Please call us at Planned Cover if you would like one of our highly experienced insurance professionals to review your current insurance program. Planned Cover prides itself on being a specialist insurance intermediary for the construction industry with a thorough understanding of the capacity challenges in the insurance market, and an appreciation of the commercial considerations for clients regarding insurance coverage at affordable pricing.
“….The insurer shall not be liable for any claim(s) or loss including costs and expenses, claims preparation costs, inquiry costs, court attendance costs or direct costs and expenses incurred in respect of any action taken to mitigate any amount which the insured would be legally liable to pay, arising directly or indirectly from or in respect of or as a result of any use of Expanded Polystyrene Panel (EPS) or Aluminium Composite Panel with a Polyethylene Core (ACPPC) including but not limited to any design, specification, installation, inspection (including failure to inspect), certification, verification or approval by or on behalf of the insured in any manner that is actually or allegedly not compliant with:
a. the Building Code of Australia; or
b. the National Construction Code of Australia; or
c. Australian Standards or other relevant standards; or
d. Commonwealth, State or Territory Legislation; or
e. Relevant Ministerial Guidelines and/or other Guidelines…..”
“…The Insurer shall not be liable under this Policy to provide indemnity in respect of any Claim against any Insured directly or indirectly based upon, attributable to, or in consequence of the specification, use or approval of any building product or material, which, at the time of use or approval, was not in compliance with the National Construction Code of Australia; the Building Code of Australia or the relevant the Australian Standard(s)….”
Senior Account Manager NSW