BSA Insurance
Queensland Building Services Authority Statutory Insurance Scheme
One of the major responsibilities of the BSA is to administer a Statutory Insurance Scheme which protects residential consumers in relation to:
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non-completion by a contractor;
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defective construction; and
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subsidence and settlement.
Sometimes consumers or builders are not happy with a decision that the BSA makes about an insurance claim. To dispute a decision by the BSA you must apply to the Commercial and Consumer Tribunal within 28 days of being notified of the decision or you forfeit your right to challenge the decision.
Lawyers Qld can advise you of your prospects and lodge an application with the Tribunal on your behalf.
To see a lawyer in Brisbane CBD phone 07 3036 5233 or Southport on the Gold Coast phone 07 56770533.
Queensland law provides that no residential contract work over the value of $3,300 can be carried out by a Contractor until the QBSA insurance premium has been paid. In practical terms the insurance policy is paid for from the consumer’s deposit monies when they enter into a Construction Contract. Once the premium has been paid the BSA should forward to the owner a copy of the insurance policy.
When you receive a copy of the policy you should ensure that the insured amount stated on the policy reflects the amount the builder is being paid. If work commences and you haven’t received a copy of the policy, contact the BSA to confirm that the Builder has paid the premium and that you are covered.
Whilst any form of consumer protection is good, this insurance scheme has led many consumers to mistakenly believe that they are automatically covered by the Statutory Insurance if anything goes wrong during the construction of their home.
Like any type of Insurance Policy there are a number of exclusions or “Limits on Right to Payment”.
We will refer to Edition 7 of the Policy which became effective on 29 September 2006.
The first clause of the policy 1.1 sounds very comforting for consumers, it reads:
“Subject to the terms of this policy, BSA agrees to pay for loss suffered by the insured in the event of the contractor failing to complete the building contract for the residential construction work.”
However the next clause 1.2 imposes the conditions that:
(a) “BSA is only liable to pay for loss under this part when the building contract is for a fixed price and the insured (consumer) has properly terminated the contract with the contractor.”
(b) In this policy, “properly” means lawfully under the contract or otherwise at law, upon the contractor’s default which extends to but is not limited to:
· The cancellation or suspension of the Contractor’s licence.
· The death or legal incapacity of the contractor.
· The insolvency of the contractor.
What does this mean to the consumer?
If the owner does not “properly” terminate the building contract the insurance is voided.
Building contracts are notoriously complicated and difficult to properly terminate. You should not consider terminating a building contract without first seeking good legal advice no matter what the circumstances. If you do not terminate the contract properly you may not be covered by the BSA insurance.
Clause 1.6 “Limit on Right to Payment”
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(a) “Where in the opinion of the BSA, the value of the contracted works to be undertaken clearly exceeds the price to be paid, BSA will reduce the amount payable under this policy by the amount of that excess.”
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(b) Where in the opinion of BSA, the insured (Consumer) pays to or on behalf of the contractor any monies for the contracted works before they become due (“prepayment”), BSA will reduce the amount payable under this policy by the value of that prepayment. (The value of the prepayment is BSA’s assessment of the incomplete work in the stage of the contract for which the prepayment was made.)
What does this mean to the consumer?
(a) If the builder has under quoted and the value of the contracted works to be completed significantly exceeds the monies still to be paid by the consumer, the BSA may reduce the amount of the insurance claim and the consumer will have to pay extra to have the works completed.
(b) If the BSA believe that the consumer has paid the Builder before the Builder was entitled to be paid, the BSA can reduce the amount of the Consumer’s insurance claim.
In practice many consumers have suffered financial losses because of these exclusions. Most consumers are not in a position to know if the builder has under quoted. Consumers are typically unaware of their rights in relation to making progress payments and simply pay progress payments when the builder asks because they don’t want to breach the contract or have works suspended.
Many consumers believe that when a builder issues a progress payment claim (that is, a demand for payment), the builder is automatically entitled to payment. This is not always the case. Contracts typically state when and how the builder may make a claim for payment.
Of course, failing to pay a valid progress payment is a serious matter (most building contracts contain a provision that non-payment constitutes a breach of contract entitling the builder to take steps towards terminating the contract). Also, the builder may suspend works and claim a cost escalation. If you think that a builder's demand for payment is not payable (for example, perhaps you think the work for that stage has not been completed) you should seek legal advice as soon as you receipt the demand for money and well before the due date for payment.
The Queensland District Court has held that “a progress certificate is not paramount” in the matter of G Lazy Pastoral Pty Ltd v Queensland Building Services Authority [2000] QDC 220. Forde D.C.J states (at page 8) “It may mean that proprietors should seek professional advice before making such progress payments to ensure that the work has been carried out to the stage so certified”
The BSA Insurance Policy places the onus entirely on the consumer to ensure that a progress payment is due and payable, if the consumer gets it wrong the BSA is entitled void or reduce the insurance cover and the Courts have upheld their position.
Clearly these are complicated matters and are beyond most consumers. Building your home is a complex financial and emotional commitment. The only way to avoid the pitfalls is to seek professional advice before entering into a Building Contract and before making any payments.
For advise on BSA Insurance call Lawyers Qld
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