logo PII
SHARE

Share this news item!

Gallagher Warns Builders of Legal Changes Affecting Professional Indemnity Insurance in NSW

New Legislation and Court Rulings Reshape Liability and Insurance Requirements

Gallagher Warns Builders of Legal Changes Affecting Professional Indemnity Insurance in NSW?w=400

The information on this website is general in nature and does not take into account your objectives, financial situation, or needs. Consider seeking personal advice from a licensed adviser before acting on any information.

Insurance broker Gallagher has issued a cautionary note to builders in New South Wales (NSW) regarding significant legal changes that are reshaping professional indemnity (PI) insurance requirements.
These developments stem from the state's Design and Building Practitioners Act 2020 (DBP Act) and a pivotal High Court ruling in the Pafburn strata defects case.

The DBP Act introduces a statutory duty of care that is non-delegable, retrospective, and applies across all building types and participants, including individual employees and directors. This duty covers construction work performed up to 10 years before the act commenced, meaning work undertaken from mid-2010 may be subject to its provisions if damage is discovered after 2020. Consequently, directors, officers, and practitioners who have since retired, sold their interest, or moved to other roles could still be held liable.

Unlike other elements of the DBP framework, such as compliance declarations tied to specific building classes, the duty of care is universal in scope. It applies across all building classes and encompasses the full range of construction activities, including design, supervision, project management, and the supply or manufacture of building products.

The Pafburn case further solidifies this framework by confirming that breaches of the DBP statutory duty of care result in non-delegable, vicarious-style liability. This means developers and head contractors can no longer rely on NSW's proportionate liability regime to limit their exposure on DBP Act claims by pointing to the conduct of subcontractors.

In light of these legal changes, Gallagher advises developers, head contractors, and other project participants to reassess their risk frameworks and insurance arrangements. Key considerations include:

  • Tightening the agreed scope of works.
  • Reevaluating contract terms with subcontractors.
  • Considering requirements for minimum PI limits.
  • Expressly contracting out of proportionate liability where appropriate.

Additionally, a closer examination of PI programs is recommended, focusing on:

  • Limits, deductibles, and retroactive dates.
  • The breadth of "professional services" definitions.
  • Whether DBP Act exposures are clearly contemplated.
  • How employees, directors, and related entities are treated under the policy.

For builders and construction professionals in NSW, staying informed about these legal developments and proactively adjusting insurance and risk management strategies is crucial to ensure compliance and protect against potential liabilities.

Published:Friday, 16th Jan 2026
Author: Paige Estritori

Please Note: We do not endorse any specific products or companies. Some content is sourced from third parties, including press releases, and may not be independently verified for accuracy or completeness.

Share this news item:

Insurance News

NSW Builders Required to Obtain Professional Indemnity Insurance by July 2026
NSW Builders Required to Obtain Professional Indemnity Insurance by July 2026
14 Apr 2026: Paige Estritori
Starting 1 July 2026, all registered building practitioners in New South Wales (NSW) will be mandated to hold professional indemnity (PI) insurance, as stipulated by the Design and Building Practitioners Act 2021. This legislative change aims to enhance accountability and protect clients from potential financial losses due to professional negligence or defects in construction work. - read more
Rising Professional Indemnity Claims in Australia's Financial Services Sector
Rising Professional Indemnity Claims in Australia's Financial Services Sector
14 Apr 2026: Paige Estritori
The Australian financial services sector is currently experiencing a significant increase in professional indemnity (PI) insurance claims, largely due to intensified regulatory scrutiny. This trend has profound implications for professionals and insurers operating within the industry. - read more
Australia's Compensation Scheme of Last Resort Faces Mounting Pressure
Australia's Compensation Scheme of Last Resort Faces Mounting Pressure
14 Apr 2026: Paige Estritori
The Compensation Scheme of Last Resort (CSLR) in Australia is currently under significant strain due to a surge in claims linked to failed financial products. This situation has prompted industry leaders to advocate for structural reforms to ensure the scheme's sustainability and effectiveness. - read more
FAAA Challenges Proposed Increases to Professional Indemnity Insurance Limits
FAAA Challenges Proposed Increases to Professional Indemnity Insurance Limits
06 Apr 2026: Paige Estritori
The Financial Advisers Association of Australia (FAAA) has recently voiced its opposition to proposed increases in professional indemnity (PI) insurance limits, cautioning that such changes could lead to significant cost burdens for financial advisers. In a submission to the Treasury's consultation on potential reforms to PI insurance within the financial services sector, the FAAA emphasised that reforms to the Compensation Scheme of Last Resort (CSLR) should take precedence over adjustments to minimum PI settings. - read more
Markel Unveils Tailored Professional Indemnity Insurance for Australian Market
Markel Unveils Tailored Professional Indemnity Insurance for Australian Market
06 Apr 2026: Paige Estritori
Markel, a prominent US-based specialty insurer, has announced the launch of professional indemnity (PI) insurance products specifically designed for the Australian market. This strategic move comes in response to a notable reduction in PI insurance capacity over recent years, leaving many professionals seeking reliable coverage options. - read more

Explore Alternative Insurance Options

Discover trusted solutions from our family of brands:

Comprehensive Indemnity Insurance to Protect Your Professional Reputation