29 August 2019

In our November 2018 Newsletter Article, we said “the world of insurance is changing rapidly”.

If anything, we underestimated the subsequent rate of change.

We are now in the middle of an “insurance crisis” and also a construction industry crisis. Confidence in the construction industry is at an all time low. It seems that every second day there is a new “defective”, “shoddy” or “falling apart” building on the front pages of the newspapers.

There is also the “cladding crisis”. The latest cost estimate of fixing defective cladding is about $6 billion*.

The 227 page judgment in the Lacrosse matter was handed down in February 2019 and it is the subject of an appeal. All cases turn on their facts so it is not certain that the costly appeal will produce any guiding precedent for insurers, construction industry professionals or lawyers.

Whatever happens on the appeal the important message, which we have been advising our clients for decades, is that your contract is king. Your conduct will be judged by reference to what your contract said you would do. It is important to spend time negotiating the terms of your contract and your scope, and seek professional advice.

As we discussed back in November:
“We are seeing a number of syndicates or insurers at Lloyd’s pulling out of PI insurance and in particular pulling out of Australian PI insurance.”

Since that time we have seen more insurers pull out of the market. Premiums continue to rise and even if your fees are similar to last year we are seeing significant renewal premium increases from insurers ranging from 10% to 300% for some professions.

In a hard insurance market we also see:
• Increasing excesses
• Policy wordings narrowing
• New exclusions being applied to policies, for example, combustible cladding exclusions.

What can you do?

We understand that not many people love paperwork, however, with the hardening market and new exclusions being applied it is more important than ever to give the renewal process the attention it needs.

We recommend completing your proposal form promptly.
If your insurer is going to apply a new exclusion we need as much time as possible to look at options and negotiate with the insurer.

We need time and information to negotiate with insurers on your behalf so return those proposal forms promptly!

Simon Gray
State Manager (NSW/ACT)