Last updated 13 December 2016

Insurance

Part 5 of the Queensland Building and Construction Commission Act 1991 (Qld) (QBCC Act) provides for a statutory insurance scheme referred to as the Queensland Home Warranty Scheme. The Queensland Home Warranty Scheme insures the construction of a house, duplex, townhouse, villa unit, any residential unit (provided it is not a multiple-storey dwelling of more than three storeys) and related roofed buildings (e.g. garage, pool change room, gazebo or shed). It also insures building work that affects the structural performance of a residence or related roofed building, relocation or replacement of a roof, wall, internal partition, floor or foundations, extensions, decks and verandahs, bathroom and kitchen renovations, and installation and repair of the primary water supply.

All builders and trade contractors carrying out building work worth more than $3300 on a residential dwelling are required to take out an insurance policy with the Queensland Building and Construction Commission (QBCC) for this work. The builder or contractor pays the premium direct to the QBCC. A copy of the building contract is provided to the QBCC by the builder, and a certificate of insurance is issued. The certificate is posted to the consumer named in the contract, together with an insurance policy conditions booklet. If these are not received by the consumer, they should check with the QBCC as it may indicate that the builder has failed to take out the required policy.

In relation to pre-practical completion, the scheme provides financial assistance (to a maximum compensation amount of $200 000) to consumers for non-completion, defects and subsidence or settlement, if a contractor fails to complete a contract for residential construction work and a contract is terminated by the insured (owner) for reasons that are not the owner’s fault. Such circumstances will include cancellation of the contractor’s QBCC licence and liquidation, bankruptcy or death of the contractor.

If the dispute resolution process fails to resolve disputes about defects, subsidence or settlement issues, or the contractor is incapable of rectifying defects or subsidence (e.g. due to liquidation or death), the scheme will cover consumers for the reasonable cost to rectify the defects, subsidence or settlement (to a maximum compensation amount of $200 000).

In addition to these main heads of cover, a benefit may be paid for rental assistance if the property is rendered uninhabitable by the work. Payment may also be made to cover the cost of furniture removal and storage costs necessarily incurred. Exact details are provided in the insurance policy conditions booklet that may be obtained from any QBCC office.

The insurance policy covers a period of six years and six months from the date the contract is signed, from the date of payment of the insurance premium or when the work is commenced, whichever is the earliest. The period of cover is extended where the work takes longer than six months to complete.

Payment under the policy

Non-completion claims require termination of the contract due to circumstances outlined in the policy. The cover granted is the extra cost to complete the residence up to the maximum insurance entitlement calculated on the original contract price. If the home is not commenced, the benefit is restricted to a refund of the money paid plus lost interest calculated at the rate nominated in the insurance certificate.

Defective construction is covered only after a contractor has failed to comply with the QBCC direction to rectify or any other direction of the Queensland Civil and Administrative Tribunal. The only exceptions to this requirement are cases where the contractor’s licence is suspended or cancelled, or the contractor is deceased, insolvent, bankrupt or in liquidation.

In certain circumstances, subsidence and/or settlement may be covered, whether or not the contractor is considered responsible for the failure. This is the only part of the cover that does not require default of the contractor.