The NSW Government has plans to make latent defects insurance compulsory by 2028, so now is the time for developers, owners and contractors to prepare.
As one of the brokers with exclusive access to this much-needed LDI capacity, Lockton is pleased to help bring a critical insurance option to the market at a pivotal time for the industry. However, LDI must be purchased prior to the commencement of construction. Once works begin, it’s too late to secure cover.
Client director Phil Clauzel said: “For the first time in years, we’re seeing meaningful capacity enter the local market, and we’re excited to bring that opportunity to our clients.
“Now is the time for decision-makers to review and update policies to align with insurer expectations and regulatory standards.
“Proactively building a strong claims history will strengthen your organisation’s position if legal mandates are enforced.”
Latent defects insurance (LDI) is designed to protect property developers or owners against damage resulting from defects in design, materials or construction that only become apparent after completion.
The insured can be any party with an insurable interest in the project and policies can be assigned to the new owners if a development is sold.
Tenants can also be included as insured parties.
Having an LDI policy in place can enhance the saleability of the completed building, while providing balance sheet protection.
A key benefit of an LDI policy is that it is written for the benefit of the property, rather than a specific legal entity.
Making a claim is more straightforward than with many other insurance policies, as there is no requirement to establish who is at fault or to prove negligence.
One simply needs to demonstrate that damage has occurred as a consequence of the manifestation of a defect in the way that the building was designed or built.
Policies are typically written for a period of 10 or 12 years and include protection for the total reinstatement value of the building.
It is designed to provide coverage for hidden structural defects in a building that become apparent after construction is completed.
LDI offers a no-fault, first-party insurance solution, meaning claims can be made without proving negligence.
Interest in enforcing mandatory LDI to enhance consumer protection is growing.
To understand more about latent defects insurance and how Lockton can help, visit our latent defects insurance page on our website for FAQs and regulatory expectations, or contact us.
Phil Clauzel
T: 0403 263 168
E: Phil.Clauzel@lockton.com
Cameron Owen
T: 0468 727 953
E: Cameron.Owen@lockton.com
The Urban Developer is proud to partner with Lockton to deliver this article to you. In doing so, we can continue to publish our daily news, information, insights and opinion to you, our valued readers.
The contents of this publication are provided for general information only. Lockton arranges the insurance and is not the insurer. While the content contributors have taken reasonable care in compiling the information presented, we do not warrant that the information is correct. The contents of this publication are not intended as a legal commentary or advice and should not be relied on in that way. It is not intended to be interpreted as advice on which you should rely and may not necessarily be suitable for you. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content in this publication.
