Under section 135 of the Building Act 1993 (Vic) and the Ministerial Order for Domestic Building Insurance, builders must obtain warranty insurance for domestic building work that exceeds the value of $12,000.
The effect in practice of such warranty insurance is however that a claim made will only be paid out by the Insurer if the builder has died, become insolvent or has disappeared- otherwise all that an Insurance company will do, is direct the builder back to remedy defective work or finish incomplete work.
Such provisions mean that a building owner needs to think very carefully about whether or not to pursue a builder for defective work, as quite often they will not be able to rely upon an insurance payout.
Additionally, in some cases where the builder has been found insolvent, VCAT has held that the insurer cannot be called upon to pay legal costs associated with a hearing, which can mean in some cases the costs of litigation outweigh the benefits.
|
