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
Source: Paige Estritori

Please Note: If this information affects you, seek advice from a licensed professional.

Share this news item:

Insurance News

BizCover and BHSI Collaborate to Provide Professional Indemnity Insurance for SMEs
BizCover and BHSI Collaborate to Provide Professional Indemnity Insurance for SMEs
25 Feb 2026: Paige Estritori
In a significant development for small and medium-sized enterprises (SMEs) in Australia, BizCover has been appointed as the exclusive direct online distributor for Berkshire Hathaway Specialty Insurance's (BHSI) professional indemnity (PI) insurance products. This partnership, effective from 1 October 2025, enables SMEs to access BHSI's PI coverage directly through BizCover's digital platform. - read more
Sterling Insurance Enhances PI Offerings with New Lloyd's Binding Authority
Sterling Insurance Enhances PI Offerings with New Lloyd's Binding Authority
25 Feb 2026: Paige Estritori
Sterling Insurance has recently secured a new professional indemnity (PI) binding authority with Lloyd's, a move that promises to provide Australian brokers with greater control over product offerings and pricing structures. This development is part of Sterling's ongoing commitment to delivering tailored insurance solutions that meet the specific needs of niche and complex risk sectors. - read more
Arch Insurance Australia Strengthens PI Team with Senior Underwriter Appointment
Arch Insurance Australia Strengthens PI Team with Senior Underwriter Appointment
25 Feb 2026: Paige Estritori
Arch Insurance Australia has announced the appointment of Jacqueline Kilday as Senior Professional Indemnity (PI) Underwriter for the Northern Region, effective immediately. This strategic hire underscores Arch's commitment to expanding its professional indemnity capabilities and providing comprehensive coverage solutions to clients across New South Wales, Queensland, the Australian Capital Territory, and the Northern Territory. - read more
Treasury's Initiative to Bolster Professional Indemnity Insurance and CSLR
Treasury's Initiative to Bolster Professional Indemnity Insurance and CSLR
17 Feb 2026: Paige Estritori
The Australian Treasury has commenced a consultation process aimed at improving the effectiveness of professional indemnity (PI) insurance, with the goal of strengthening the Compensation Scheme of Last Resort (CSLR). This initiative seeks to gather stakeholder feedback on the current operation of PI insurance and explore opportunities for enhancement. - read more
Sterling Insurance's New Lloyd's Binder: A Boost for Professional Indemnity Offerings
Sterling Insurance's New Lloyd's Binder: A Boost for Professional Indemnity Offerings
17 Feb 2026: Paige Estritori
Sterling Insurance has announced the acquisition of a new professional indemnity (PI) binding authority with Lloyd's, a move set to provide Australian brokers with greater control over product offerings and pricing structures. This development is part of Sterling's ongoing commitment to delivering tailored insurance solutions that meet the specific needs of niche and complex risk sectors. - read more

Explore Alternative Insurance Options

Discover trusted solutions from our family of brands:

Comprehensive Indemnity Insurance to Protect Your Professional Reputation