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Cautionary tale – Claims under the QBCC Insurance Scheme for Defective Works

The recent decision of Cronin –v- Queensland Building and Construction Commission [2019] QCAT14 highlights the importance of obtaining independent legal advice before making an insurance claim against the QBCC Home Warranty Scheme for defective building works.

In this case, Mr and Mrs Cronin applied to QCAT to review a decision made by the QBCC to disallow an insurance claim under the Home Warranty Scheme.
What happened was the QBCC suspended and cancelled the licence of the building contractor engaged to construct a new house for Mr and Mrs Cronin. This occurred before the house was completed.

While Mr and Mrs Cronin made an insurance claim under the Queensland Home Warranty Scheme, they also engaged new contractors to perform works, firstly to make the house safe, and then, to complete the house itself. They did this before the insurance claim was accepted by the QBCC and before the QBCC had approved the engagement of the contractors.

As a result, the QBCC rejected the claim because the new contractors had been engaged to work on the house without their prior approval. It is a condition of the Queensland Home Warranty Scheme (which is a statutory insurance scheme administered by the QBCC) that the insurance claim was approved prior to the engagement of any new contractors or further work being performed.

In determining that the QBCC was correct to disallow the claim, QCAT found that the obvious reason for the applicable sections of the legislation was to discourage house owners from acting in a way which makes it more difficult for the QBCC to assess the validity or amount of the insurance claim.

The exception is where emergency works are required to make a structure safe.
However, in reaching its’ decision, the Tribunal found that the works done at the property by the later contractor fell in to three categories:

1. Emergency work to make the structure safe.

2. Rectification work to ensure the structure complied with building standards and could properly be completed as a house.

3. Work to complete the house.

Had Mr and Mrs Cronin only engaged the subsequent contractors to perform the emergency work, the outcome of the claim may have been different.

However, the Tribunal found that works were performed prior to the insurance claim being lodged without written approval of the QBCC, thus invalidating the insurance policy and that the QBCC were entitled to reject the insurance claim made.

Accordingly, not only were Mr and Mrs Cronin out of pocket for the money paid to their original contractor, but they were also out of pocket for the monies paid to remedy the works and complete the house.

The lesson to be learned is that whenever you have defective building works or a building contract issue, it is important to obtain independent legal advice before taking any action, as the action you take may affect your insurance coverage under the Qld Home Warranty Scheme.

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