Simon was embarking on a building project at his home. He wanted to build a retaining wall, new garage, and driveway, and had engaged a contractor to manage the whole process for him. Simon contacted his insurance broker and asked her to arrange contract works insurance. The broker arranged contract works insurance for a 6-month period, from July until December, and explained that the insurance would cover property damage arising out of accidents associated with the building work they were planning. The broker told Simon in an email that he should make sure any contractor coming on to site had their own liability insurance.
In December the broker contacted Simon to find out how the building work was going, and whether they needed to extend the contract works insurance term. Simon replied that the retaining wall was complete, but they would be working on the driveway and drainage in the new year. The broker extended the contract works insurance term for a further six months.
In June the broker contacted Simon again, and Simon said the work had not resumed. The broker went back to the insurer for advice. The insurer asked the broker for more information, including photographs, so that the insurer could make sure appropriate cover was in place. The broker did not pass this request on to Simon.
After a further discussion with the broker, Simon agreed to let the contract works policy lapse. The broker advised Simon that the work that had been completed would be covered by his home insurance policy.
About two months later a severe storm caused a landslip on Simon’s property. The landslip did not damage any property, but the city council said Simon was responsible for securing the slip. This work would cost about $180,000.
Simon went back to his broker and explained what had happened. The broker helped Simon lodge an insurance claim with his insurer. The insurer considered whether the damage would be covered by EQC.
EQC engaged Geotech engineers who determined that the slip was not caused by the storm, but by the contractor who had left excavation work unsecure in breach of Worksafe guidelines. EQC declined the claim.
Simon then asked his insurer to compensate him for the cost of repairing the slip. The insurer advised that there was no cover because the contract works policy had lapsed. The insurer went on to say that even if the contract works cover had been in place, the policy only covered damage to the contract works (the buildings and structures on the land) and even if the works had been damaged, there was no cover because work on site had ceased more than 12 months earlier.
The insurer also explained that the loss was not covered by Simon’s house insurance policy because there had been no damage to the house and the policy only covered damage to property, not the land.
Simon complained to FSCL about the broker’s advice.
Dispute
Simon said that the broker should have passed on the insurer’s request for information. Simon would have responded, and the insurer may have been able to find alternative cover. Simon also complained that the broker had told him that the damage would be covered by his house insurance policy. Simon said the broker should have told him that a house insurance policy only covers damage to property and that the land was uninsured. If Simon had known his property was uninsured, he would have been able to explore options to protect him from loss as a result of landslips that did not damage the property.
The broker did not have any record of contacting Simon about the information requested by the insurer, but even if she had, the broker said it would have made no difference to Simon’s situation. The work on site had ceased, so there would have been no cover under the contract works policy. The broker said it would have been wrong of her to recommend Simon keep the contract works policy when work has ceased.
The broker also explained that it is impossible to insure land; insurance is only available for property damage.
Review
We agreed the broker should have passed on the insurer’s request for more information, but we were not convinced that this would have made any difference to Simon. The contract works policy only covered damage to property (not land) and did not provide cover where work has ceased. Although Simon disputed that work had ceased, he had told the Geotech engineers when they inspected the site shortly after the damage occurred that work had stopped about a year earlier.
Although Simon complained that the broker had misled him about the extent of his house insurance cover, we found that the broker’s advice was correct. The house policy would cover the completed retaining walls and any other property damage. The landslip did not damage the house, so there was no damage to property. It was our view that the broker had not misled Simon.
We went on to consider what would have happened if the broker had specifically told Simon that land was not insured under the house insurance policy and whether it would have been possible for Simon to insure the land that the contractor had failed to adequately secure. We found that there wasn’t any policy available on the market that would have covered the damage caused by land where there was no property damage involved.
We suggested to Simon that he seek compensation from the contractor whose faulty workmanship had caused or contributed to the landslip. Simon said that he had explored this possibility with his lawyer, but the contractor did not have appropriate material damage or professional indemnity insurance.
We were sorry for Simon. Through no fault of his own, he was left to pay approximately $180,000 to repair the damage caused by the landslip. Unfortunately, it is impossible to insure against every possible risk.
Resolution
While the broker accepted our decision, Simon did not and indicated an intention to take it further.
Insights for participants
It is very important to pass on an insurer’s request for information. In this case, we were satisfied that if the information request had been passed on it would not have made any difference to Simon’s situation. In different circumstances, a failure to pass on information to an insurer could cause a loss and the broker may have been liable for that loss.
Insights for consumers
When engaging tradespeople to carry out work on your house or land, it’s important to check that they have appropriate insurance cover and the right amount of cover for faulty workmanship, so that if their work is faulty and causes you a loss, you will be able to make a claim against the contractor.
