Landmark NSW Ruling: New Risks for Construction Liability Insurance
Court Decision Eliminates Proportionate Liability Defence for Builders and Developers
2
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.
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.
Arch Insurance Australia has announced the promotion of Aisling Hegarty to the position of Head of Professional Indemnity (PI), effective immediately. This strategic move underscores Arch's dedication to bolstering its PI insurance offerings across the Australian market. - read more
The Insurance Council of Australia (ICA) has called for structural reforms to the Compensation Scheme of Last Resort (CSLR) to address growing funding pressures and enhance consumer protection. This appeal comes in response to a Treasury consultation paper examining the role of professional indemnity insurance in compensation claims. - read more
In a significant development for Australian small and medium-sized enterprises (SMEs), BizCover has been appointed as the exclusive direct online distributor of Berkshire Hathaway Specialty Insurance's (BHSI) Professional Indemnity (PI) insurance. This partnership, effective from 1 October 2025, enables SMEs to access BHSI's PI cover directly through BizCover's award-winning digital platform. - read more
The Australian financial services sector is currently witnessing a significant increase in professional indemnity (PI) insurance claims. This trend is largely attributed to intensified regulatory scrutiny and recent legal actions initiated by the Australian Securities and Investments Commission (ASIC). - read more
Sterling Insurance has recently secured a new professional indemnity (PI) binding authority with Lloyd's, a development that promises to provide Australian brokers with greater control over product offerings and pricing structures. This strategic move 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
