Defective Construction Products Implications for Insurers

Transcription

1 Defective Construction Products Implications for Insurers Charles Thornley 18 July 2017

2 Road map ACP and other defective products The regulatory framework Consequences: legal and regulatory Policy response What can insurers do?

3

4 Aluminium Composite Panels (ACPs)

5 Video 5

6 6

7 Video 7

8 8

9 Australia - Infinity cables recalled due to fire risk 9

10 Australia Tremolite asbestos in Snow White brand tiles 10

11 Australia - Exploding glass balustrades 11

12 Australia PPR piping 12

13 New Zealand - seismic steel reinforcing mesh 13

14 New Zealand leaky cladding systems 14

15 US sulphorous and corrosive Drywall 15

16 US US$1 billion lawsuit over defective CPVC pipes used in sprinkler systems 16

17 Canada defective IKO roof shingles 17

18 China the sand scandal corrosive concrete 18

19 Road map ACP and other defective products The regulatory framework Consequences: legal and regulatory Policy response What can insurers do?

20

21

22

23 The Jargon NCC BCA PCA ACBC CodeMark WaterMark Standards Australia DTS NATA JAS-ANZ 23

24 The National Construction Code Building work is required to comply with the performance requirements of the National Construction Code (NCC) The NCC sets the minimum standard which various building products must meet. Does this by reference to Australian Standards and other documents. Two compliance pathways: Deemed-to-Satisfy; or Performance Solution. Must provide evidence of suitability to demonstrate compliance. 24

25 Non-conforming and Non-compliant Non-conforming a building product that does not meet specified technical requirements. Non-compliant a conforming product has been used in a manner that does not comply with the requirements of the NCC. 25

26 Conformance Product conforms to relevant technical requirements: o o o o o Certificate of Conformity by CodeMark or WaterMark Certificate of Accreditation from a State/Territory Accreditation body Certificate from a product certification body accredited by JAS-ANZ Report registered by a Registered Testing Authority "Other" documentary evidence 26

27 Compliance Compliant use of conforming product within the design: o Certificate of Compliance from an appropriately qualified person (eg. fire engineer) o "Other" documentary evidence that correctly describes the properties and performance of the form of construction and adequately demonstrates its suitability for use in the building 27

28 NCC & ACPs NCC requires Type A and Type B buildings to have noncombustible external walls, common walls, flooring and floor framing to lift pits. However, there is an exception to the "non-combustibility" requirement for linings, finishes and attachments to other building elements (Clause 2.4, Specification C1.1, NCC). These are required to meet other fire hazard requirements but do not have to pass the very rigorous "noncombustibility" test set out in AS1530.1:1994 Combustibility Test for Materials. 28

29 NCC & ACPs Before the Lacrosse fire in November 2014, the building industry adopted a certain interpretation of the exception to the combustibility requirement for external walls: Clause allowed the use of ACPs as part of the external wall cladding system on the basis that they are finish, lining or attachment; and Building Surveyors / Certifiers qualified to determine whether the use of the ACP constituted an undue risk of fire spread via the façade of the building 29

30 NCC & ACPs o Following its initial investigation into the Lacrosse fire, VBA issued an Industry Alert which clarified its view that: in order to be a finish, lining or attachment, an ACP cannot be an integral part of the wall (i.e not just a structural issue, must look at weather-tightness, energy efficiency, etc.) it is appropriate to obtain the opinion of a registered fire safety engineer as to whether the use of the ACP as a finish or attachment constitutes an undue risk of fire spread via the façade of the building 30

31 Road map ACP and other defective products The regulatory framework Consequences: legal and regulatory Policy response to defective construction products What can insurers do?

32 Consequences Newton s 3 rd Law For every Action there is an equal and opposite Reaction.

33 Inquiries and (more) Regulation Audits Victoria and now other States Inquiries State and Commonwealth National regulations for unilateral conformity More legislation:queensland s Building and Construction Legislation (Non conforming Building Products Chain of Responsibility and Other Matters) Amendment Bill

34 Road map ACP and other defective products The regulatory framework Consequences: legal and regulatory Policy response to defective construction products What can insurers do?

35 Product lifecycle 1. Design and development 2. Manufacture 3. Sale from factory 4. Export 5. Import 6. Selection 7. Local purchase 8. Installation 9. Certification 10. Occupation 11. Incident 35

36 Policies engaged First Party Product Recall Contract Works ISR / Property Third Party Professional Indemnity Public & Products Liability Hybrid Mitigation Extension Inquiries Costs cover Directors & Officers 36

37 Road map ACP and other defective products The regulatory framework Consequences: legal and regulatory Policy response to defective construction products What can insurers do?

38 How can insurers protect themselves? Proposals specific questions Broader product liability exclusions Specific product exclusions Non-compliant product exclusions Write-back on extensions Subrogated recoveries 38

39 Charles Thornley Partner Tel: Rohan Bennett Consultant rbennett@landers.com.au Tel: Karolina Juric Senior Associate kjuric@landers.com.au Tel: Nicola Gardner Senior Associate ngardner@landers.com.au Tel: This presentation cannot be regarded as legal advice. Although all care has been taken in preparing this presentation, readers must not alter their position or refrain from doing so in reliance on this presentation. In particular, the clauses included in this presentation are randomly selected from sample project documents and are not to be assumed to be drafting models. Where necessary, advice must be sought from competent legal practitioners. The author does not accept or undertake any duty of care relating to any part of this presentation. 39