QBCC Home Warranty Insurance Claims – part 2

Part 5 of the Queensland Building and Construction Commission Act 1991 (the Act) establishes a statutory insurance scheme, the purpose of which is in certain situations to provide basic assistance to consumers of residential construction work for loss associated with work that is defective or not completed.

As part of the building process, the builder pays a premium to the QBCC to insure the residential construction work, the amount of the premium being included as part of the contract price and paid to the QBCC before the residential construction work commences.  QBCC then sends to the consumer a notice of cover providing details of the residential construction work, the builder and the premium paid.

However, many consumers of residential construction work are uncertain about when the coverage commences and ends and the value of it under the QBCC Home Warranty Insurance scheme.

When does coverage under the QBCC Home Warranty Insurance scheme commence and end?

Under section 68H(1) of the Act, cover under the QBCC Home Warranty Insurance scheme only comes into force if a consumer enters into a written contract for the carrying out of residential construction work and the contract bears the licence number of a QBCC licensed contractor.

If the building contractor does not hold a QBCC licence, a consumer will not be covered under the QBCC Home Warranty Insurance scheme unless, among other things, prior to entering into the contract the building contractor made a representation that would cause a reasonable person to believe the residential construction work was covered by the statutory scheme or there was a fraudulent representation about being licensed.

Pursuant to section 68H(2) of the Act, cover applies whether or not the insurance premium has been paid or a notice of cover issued, but if the premium has not been paid then the QBCC may recover the amount of the premium as a debt from the consumer.

Coverage under the QBCC Home Warranty Insurance scheme can only be cancelled if:

• the residential construction work has not started; and the residential construction contract has been terminated; and less than one year has elapsed since when the residential construction contract was signed; and the deposit has been refunded.

Coverage under the QBCC Home Warranty Insurance scheme is for a period of six years and six months from the earliest of when the:

• premium is paid;
• contract is entered into; or
• residential construction work commenced.

The period of coverage is extended where the residential construction work takes longer than six months to complete.  respect of defects, strict time limits apply for making a claim depending on whether the defect complained of is structural or non-structural.

What is the monetary value of the cover under the QBCC Home Warranty Insurance scheme?

The type of claims that can be made for loss associated with work that is defective or not completed are not just the costs for completing the residential building work or rectification of defects, but can also include:

• pre-completion damage caused by fire, storm theft or vandalism; and
• reimbursement for accommodation, removal and storage costs.

A sliding scale is used to calculate the premium to be paid for coverage under the QBCC Home Warranty Insurance scheme, based on the insurable value of the residential construction work to be performed.

For example, as at the time of writing and by reference to the 1 August 2019 New Home Construction Insurance Premium table, the standard premium payable for an insurable value up to $300,000.00 under a new residence construction contract was $2,073.10.  The standard premium payable for an insurable value up to $2,000,000.00 under a new residence construction contract was $17,204.35.

That said, a monetary cap applies to the value of a claim made upon the QBCC Home Warranty Insurance scheme, regardless of the insurable value of the residential construction work.  For example, the maximum value of a claim for non-completion under a new residence construction contract where a standard premium has been paid is $200,000.00, or $300,000.00 if optional additional coverage has been taken out pursuant to the terms of section 67Z of the Act.

The aforementioned amounts include alternative accommodation, removal and storage costs.  The same amounts apply in relation to a claim made pursuant to remedied defects.

Takeaways

Given the monetary cap on the value of a claim under the QBCC Home Warranty Insurance scheme, consumers need to be vigilant in monitoring the residential construction work as it is performed and to act promptly to protect their legal rights.

Links and further references

Legislation

Queensland Building and Construction Commission Act 1991

Related insights

Top ways to avoid a building dispute in Queensland

Implications of non-compliance with the Queensland Building and Construction Commission Act (Qld) 1991

Why you should not engage an unlicensed building contractor

Termination for incomplete construction work

QBCC Home Warranty Insurance Claims 1

Further information about the QBCC

Disclaimer

This article contains general commentary only.  You should not rely on the commentary as legal advice.  Specific legal advice should be obtained to ascertain how the law applies to your particular circumstances.