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:
-
non-completion by a contractor;
-
defective
construction; and
-
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.
We offer a web special of $295
+ Gst for an initial consultation with a lawyer at either the
Brisbane CDB or Southport on the Gold Coast.
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”
-
(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.”
-
(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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