Insurance for protection work in Victoria – is your policy properly endorsed?

Before any protection work can be commenced section 93(1)(a) of the Building Act requires the owner to have in place a contract of insurance against damage by the proposed protection work to adjoining property. The Court determined that this required insurance on which the (adjoining) owner of damaged property can itself claim (i.e. ‘first party’ indemnity insurance).

The policy in question contained the following endorsement: ‘the attached Protection Works Endorsement shall apply in respect of the owners of property adjoining 150 Queen Street’. The question was whether this endorsement satisfied the requirement to provide first party indemnity insurance. The Court’s answer was ‘yes’.

The Appeal Court said that this obligation was met if an adjoining owner fell within sections 20 and 48 of the Insurance Contracts Act 1984 (Cth)). Under section 20 ‘an insurer under a contract of insurance is not relieved of liability under the contract by reason only that the names of the persons who may benefit under the contract are not specified’. Under section 48 ‘a third party beneficiary under a contract of general insurance has a right to recover from the insurer, in accordance with the contract, the amount of any loss suffered by the third party beneficiary even though the third party beneficiary is not a party to the contract’.

Accordingly, even though the obligation under section 93(1)(a) is strict, it will be met even if adjoining owners are not mentioned by name in a contract of insurance (s. 20 of the Insurance Contracts Act), so long as they are within a class of persons specified or referred to in a contract of insurance as endorsed to whom the benefit of the insurance cover extends (s. 48 of the Insurance Contracts Act).

This article was written by Theo Kalyvas, Partner and Joel McDonald, Trainee Solicitor.