The initial phase of the NSW Design and Building Practitioners Act 2020, which came into effect last June, contains some major changes for professionals, including architects and engineers.

They include:

The introduction of a new duty of care with retrospective effect. This only applies to work on class 2 buildings.

The new duty of care permits third-party claims against professionals, such as architects or consulting engineers, for example, claims from owners of residential properties with whom a professional may not have previously had a direct contractual relationship. Claims can be made retrospectively for services provided over the previous 10 years.

JMD Ross has already seen several such claims over the last few months. In an ever-hardening professional indemnity (PI) market, where premiums are increasing and insurers continue to withdraw from the market, these claims further reduce insurers’ appetite for risk.

The Act refers to maintaining ‘adequate insurance’ and this area of the legislation is still being finalised.

One reason is because insurance industry professionals were not consulted until late in 2020 and there are several areas that need to be agreed. Registered building practitioners are exempt from the ‘insurance’ element of the legislation for two years from 1 July 2021.

The Act sets out procedures for the registration and certification process required for design practitioners and related professionals.

Professionals are adapting to these changes. With the required Form of Declaration, we have identified no specific issues arising that affect clients’ existing PI coverage. However, we’re aware of non-JMD Ross clients experiencing some challenges with the new broader and retrospective duty of care. If you have any queries, JMD Ross can advise you individually on this and any other aspects of the legislation.

JMD Ross Insurance Brokers welcomes the positive intent of the Act, which should reap benefits for the industry and its professionals in future years. However, with the enhanced duty of care and the current increased number of claims, we expect heightened challenges in obtaining PI insurance for professionals in the future. We will keep you informed about developments with and potential amendments to the Act.

To discuss your risk management and insurance requirements, please contact:

Andy Wass        M: 0425 274 952               E: awass@jmdross.com.au

John G Duncan M: 0418 976 772               E: jgduncan@jmdross.com.au

John Davaine    M: 0413 610 523               E: jdavaine@jmdross.com.au

Sanika Gode     M: 0422 930 844               E: sgode@jmdross.com.au

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