Landmark NSW Ruling: New Risks for Construction Liability Insurance
Court Decision Eliminates Proportionate Liability Defence for Builders and Developers
0
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.
Recent developments in New South Wales have significantly altered the liability landscape for construction professionals.
A landmark court ruling in the Pafburn case has removed the proportionate liability defence previously relied upon by developers and head contractors, thereby increasing their exposure to claims related to building defects.
The Design and Building Practitioners Act 2020 (DBP Act) introduced a statutory duty of care aimed at protecting property buyers from construction defects. This duty is non-delegable, retrospective, and applies to all participants in the construction process, including individual employees and directors.
The Pafburn case clarified that breaches of this statutory duty create a vicarious-like liability, meaning that builders and developers are now fully responsible for the entire cost of rectifying defects, regardless of subcontractor involvement. This places the onus on them to pursue subcontractors through separate legal actions.
Given these changes, it is imperative for construction companies and professionals to reassess their professional indemnity (PI) insurance policies to ensure they provide adequate coverage for the increased risks. Additionally, strategic management of complex multi-party litigation, such as initiating cross-claims, will be essential in allocating remediation costs appropriately among responsible parties.
These developments underscore the need for heightened diligence and comprehensive risk management strategies within the construction industry to navigate the evolving legal landscape effectively.
Published:Monday, 9th Feb 2026 Source: Paige Estritori
Please Note: If this information affects you, seek advice from a licensed professional.
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
Recent developments in New South Wales have significantly altered the liability landscape for construction professionals. A landmark court ruling in the Pafburn case has removed the proportionate liability defence previously relied upon by developers and head contractors, thereby increasing their exposure to claims related to building defects. - read more
Sydney-based insurtech company Upcover has unveiled a new management liability insurance product designed specifically for small and medium-sized enterprises (SMEs) and sole traders in Australia. This offering aims to provide comprehensive protection against a range of risks that business owners may face. - read more
The Australian Prudential Regulation Authority (APRA) has released its latest National Claims and Policies Database, providing valuable insights into the professional indemnity (PI) insurance sector for the 2022 underwriting year. The data indicates that PI claims payments for non-facility business remained relatively stable at $1.111 billion, a slight increase from $1.109 billion in the previous year. - read more
Sydney-based insurtech company Upcover has unveiled a new professional indemnity and public liability insurance product tailored specifically for nurses across Australia. This initiative aims to provide comprehensive coverage that meets the unique needs of nursing professionals, including nurse practitioners, in-patient nurses, doulas, and nursing students. - read more
