If you work as an engineer or as a design or building practitioner, then chances are by now, you’ve heard of a new regulation in New South Wales that was introduced last year – the Design and Building Practitioners Regulation 2021 (NSW). Perhaps what you may not have considered is the impact the new regulations has on your business insurance.
There are some important considerations that have arisen from the legislation, notably the requirement for engineers, design, and building practitioners to be indemnified with an ‘adequate’ level of cover under a professional indemnity insurance policy.
To find out how this affects you, we run through what you need to know below.
Explaining the Design and Building Practitioners Regulation 2021
The Design and Building Practitioners Regulation 2021 (NSW) was hotly anticipated within the construction industry, and came into effect on July 1, 2021. Under the regulation, there are two new registration schemes that have been introduced for practitioners working on class 2 buildings.
The registration schemes are directly related to professional engineers and design and building practitioners and have been introduced to help ensure that buildings are being built in a trustworthy manner and to help restore confidence within NSW’s residential construction industry.
How does the regulation affect my business insurance?
The new regulation clarifies aspects of the Design and Building Practitioners Act 2020 (NSW), one of which includes insurance provisions relating to professional indemnity insurance. Under the new regulations, professional engineers, as well as design and building practitioners, are required to be indemnified via a professional indemnity policy under the Act for ‘any liability’ to which they might become subjected.
This places a question mark over existing professional indemnity policies as to whether they provide sufficient coverage under the new regulation.
Ensuring you have adequate cover
Adequately protecting yourself under the new regulation won’t just involve dusting off the product disclosure statement of your existing cover, but looking at your whole risk landscape.
Assessing your risks
If you’re a building or design practitioner or professional engineer, some of the considerations when assessing if you’re adequately covered include:
- The terms and conditions of your policy.
- Any exclusions, exceptions or limits of the cover.
- How long you have been registered for.
- The volume and nature of your work, including any risks associated with it.
- Your financial capacity.
- Estimating a reasonable claim amount that could potentially be brought against you.
While these have all historically been things that any prudent insured person (or their insurer) would consider when assessing risk, divisions 4 and 5 of the regulation seemingly impose a much more stringent requirement on the Building Practitioner or Professional Engineer to assess their risks and their cover terms.
Not only does this speak to the importance of reconducting a risk assessment to ensure you’re adequately protected, but also to revisiting your risk management framework and identifying any gaps that could potentially expose you under the new regulation.
Did you know: Barrack Broking offer risk consulting services, where we guide you on how to identify, analyse, evaluate and treat risks in your business through insurance risk profiling and an organisational risk management review and benchmarking?
Retroactive Cover
One of the conditions to satisfying the new regulation is to ensure that your professional indemnity cover is retrospective to the date of your registration. This requirement is laid out in divisions 2 and 3 for design and engineering practitioners.
Previously, you may have chosen a specific retroactive date in order to keep premiums costs low and keep your cash flow steady. However, with the new retrospective requirement, making decisions such as that may see you fail to meet the regulation and incur heavy penalties.
Refresher on how Professional Indemnity Insurance works
With so much talk about very specific requirements within your professional indemnity policy, you may have realised that you need to brush up on your professional indemnity insurance knowledge; we’ve got you covered:
- Professional indemnity cover helps to protect you against claims where it’s alleged your specialist services or advice have caused damages to third parties or financial loss.
- Typically, it helps to cover any legal costs or claims investigation costs involved in settling claims.
- Should you incur expenses caused by the need to hire a PR consultant for professional reputation repair, professional indemnity cover may also cover reasonable and necessary fees to do so.
- Professional indemnity and public liability are different insurance products, but often work hand in hand in the building and construction industry. Both do help provide protection against claims that your business caused injury or damage to someone, but only professional indemnity covers loss due to your professional services or professional advice.
- It does not cover intentional damage or fraud, nor does it cover claims arising due to bodily or property damage.
Why accessing an experienced insurance broker is necessary when it comes to Professional Indemnity Insurance
When looking at any commercial insurance, especially professional indemnity, there are a myriad of terms, exclusions, concepts and clauses to be acutely aware of. Businesses do not simply set one insurance product and forget. Protecting businesses from the multitude of risks they are exposed to requires constant evaluation and often modification to risk identification, evaluation, transfer and mitigation.
What sets Barrack Broking apart is that we work as a strategic partner to your business and consistently focus on applying best practice risk management principles, which also extend to helping you navigate professional indemnity covers claims.
Are you certain that your cover adequately protects you under the Design and Building Practitioners Regulations? Gain the certainty you need to keep building as a professional by reaching out to us, today.
