Building sector ‘in danger of collapse’

Building certifier warns the building industry will ‘collapse’ over compulsory indemnity insurance.

Jonathan Evans, left, and Ron Sherar, of JMG Building Surveyors, which has written to the Prime Minister warning of an insurance crisis. Picture: Matthew Poon

The building certifier behind Perth’s $1.6 billion Optus Stadium has warned Scott Morrison that his firm will be forced out of business and the construction industry will “collapse” without settlement of a national crisis over compulsory indemnity insurance.

In a letter to the Prime Minister obtained by The Australian, JMG Building Surveyors chief executive John Massey says the current trend of insurance companies offering coverage to private building certifiers with exclusions for dangerous materials such as cladding would break his firm’s contracts.

The result would be to force JMG and other certifiers out of business.

Mr Massey said certifiers were concerned that state governments were responding to skyrocketing insurance premiums with legislation to allow policy exclusions in the mistaken belief “this will somehow make the problem disappear”.

“I am sorry to inform you that it will not,” he told Mr Morrison.

The JMG chief’s warning comes as a proposal by Industry Minister Karen Andrews yesterday for a national taskforce to formulate a nationally consistent approach to building regulations was immediately rejected by state governments ahead of a joint ministers’ meeting called to deal with the crisis on Thursday.

Mr Massey’s letter to the Prime Minister echoes a warning to him from five of the nation’s largest business groups that the building sector will grind to a halt unless unaffordable insurance premiums and exclusionary policies are dealt with.

Some building firms are already threatening to stop work on all projects involving cladding until the crisis is solved.

Mr Massey said JMG currently had insurance coverage without exclusions.

“But now, insurance companies are refusing to offer new policies to building surveyors and other industry professionals that don’t have exclusions,” his letter tells Mr Morrison.

“As a building surveying firm, JMG cannot continue without being covered by full insurance, which of course is an expectation of our clients, as well as the general community.

“We will be required to close our business without our current insurance cover. JMG and our staff are not alone. Building surveying firms across Australia have closed their doors and many more will be forced to follow.

“Indeed, without a workable solution on the table very soon, I believe the building and construction industry throughout Australia will eventually collapse.”

JMG has signed off on building code and safety compliance for some of WA’s biggest building projects including Optus Stadium, Perth Arena and St John of God Hospital. It is working on the new $428m WA Museum.

JMG executive Ron Sherar, who led the certifying team for the stadium, said the company would not be able to secure an insurance policy — when its renewal was due next April — that did not make Mr Massey personally liable for materials used in projects over the past six years.

“It’s past projects, not just projects going forward. Ministers don’t understand that,” he said.

Australian Institute of Building Surveyors chief executive Mark Mace said Thursday’s meeting of state ministers had to solve the crisis. “We have been warning governments at all levels for more than four years that this would happen,” he said.

The Australian has learned another building surveyors company based in Launceston, Protek, intends to close its doors on Friday after 20 years in business, citing unaffordable indemnity insurance.

Protek owner Phillip Connors said insurance problems had forced the closure and sacking of seven staff.

MBA chief executive Denita Wawn said insurance premiums were “spiking” as much as 200 to 300 per cent for inspectors, surveyors, designers and builders.

Ms Wawn warned problems associated with remedial cladding work were so serious that MBA member firms were threatening a strike over such work until the insurance crisis was resolved.

In the wake of London’s Grenfell Tower fire that claimed 72 residents’ lives in June 2017, dozens of apartment blocks and commercial buildings in Australia have been identified with defective cladding and are slated for replacement cladding.

“Our members simply won’t be able to go near that work if the insurance issue isn’t dealt with,” Ms Wawn said.

Before Thursday’s meeting in Sydney of federal and state industry ministers to discuss the insurance crisis, industry repres­entatives, the MBA and the Property Council will be invited to a three-hour “round table” to put their case.

Federal Industry Minister Ms Andrews will then address state counterparts, detailing her proposal for a national taskforce to help states implement recommendations of a building industry report by former top bureaucrat Peter Shergold.

“The lack of confidence in building regulations is slowing Australia down,” Ms Andrews told The Australian.

Queensland Public Works Minister Mick de Brenni dismissed the Andrews proposal, saying states could not regulate the insurance sector and it was up to the commonwealth to act.

“I doubt the public thinks the answer to this national problem is another layer of bureaucracy,” Mr de Brenni said.

NSW Better Regulation Minister Kevin Anderson also rejected Ms Andrews’s proposal.

“The time for talk is done, our communities expect action,” he said.