26/03/2020 - 15:39

Insurance impasse could halt construction jobs

26/03/2020 - 15:39

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Western Australia’s biggest building surveyor has warned an insurance impasse could halt major construction and infrastructure jobs across the state, with surveyors facing cost hike challenges and delays in renewing professional indemnity insurance.

Some of WA's biggest builds could be halted unless an insurance solution is found. Photo: Attila Csaszar

Western Australia’s biggest building surveyor has warned an insurance impasse could halt major construction and infrastructure jobs across the state, with surveyors facing cost hike challenges and delays in renewing professional indemnity insurance.

In Australia’s construction sector, surveyors are required to take out professional indemnity insurance to cover their legal liabilities in regards to providing advice and services to clients.

John Massey Group, which has issued more than $6 billion in insurance certificates for active WA construction and infrastructure projects, is finding it difficult to renew its professional indemnity policies.

JMG director John Massey said the international response to flammable cladding on buildings and the risk of legacy legal action had resulted in insurers abandoning issuing the policies for building surveyors.

Mr Massey said insurance providers were also facing unprecedented demand because of the spread of COVID-19, which was posing an additional challenge.

“We are confronted with insurance options which contain unreasonable exemptions, unviable excesses and excessively high premiums,” Mr Massey said.

“This is an industry-wide issue, we have already taken over the work of three companies that could not meet their insurance requirements and we will be next.”

Mr Massey said state governments in Victoria and NSW had taken steps to assist surveyors obtaining insurance, but WA had not acted to date.

He urged Commerce Minister John Quigley to consider providing building certifiers with indemnity insurance until commercial options become available again.

Meanwhile, the Master Builders Association has created a blueprint for building and construction sector to navigate the economic challenges of the COVID-19 crisis.

Master Builders WA executive director John Gelavis said it was crucial that the building industry stayed afloat among the economic wreckage wrought by the novel coronavirus pandemic.

Mr Gelavis called on the state government to identify a new pipeline of short and long-term future projects to retain confidence in the construction sector.

“Refurbishment or maintenance projects would be a good, immediate start, because some may not require planning or building approvals,” Mr Gelavis said.

“If they do, they should be fast-tracked. The government could start with minor school maintenance work, then larger asset creation projects like hospitals, and then infrastructure investment, which supports all Western Australians.”

The MBA also requested the state government to increase the first home owner grant to $40,000 until the end of September, expand Keystart, provide incentives for property owners to renovate rentals and provide financial support for homeowners to install energy efficient devices in their homes.

Mr Gelavis said the industry was also under threat from delays associated with the COVID-19 crisis.

“A major industry threat is the potential enforcement of liquidated damages clauses due to project delays caused by a lack of supplies or labour shortages during quarantine,” Mr Gelavis said.

“Liquidated damages clauses in contracts put the viability of businesses at risk. 

“We urgently request governments of all levels to publicly announce they will not pursue liquidated damages in any supply contracts due to impacts of COVID-19 and ask that private clients take a similar approach.”

Mr Gelavis said he expected shortages of imported materials to peak in the June quarter for Chinese imports, and the September quarter for European products.

“Some products can be sourced from alternate suppliers, but with fixed price contracts the norm, the increased cost of substitute products can raise difficulties,” he said.

“The impact of an industry slowdown is looming over the next few months.

“If support is not provided by the state government, many small builders, subcontractors and small business owners will suffer a reduction in cashflow, leading to a significant decrease in apprentices in training and ultimately an increase in insolvencies.”

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