The introduction of latent defects insurance (LDI) in Australia has been hailed as a 'game changer' for developers, builders and owners of new properties. Against a background of widespread reports of failures in design, workmanship and use of inferior materials in the construction sector, LDI provides a 10 year indemnity period, with claims being triggered by the discovery of structural defects after a building is completed.
Through the Gallagher construction team partnership with LDI provider Resilience Insurance, we offer this cover which has been used effectively in Europe for decades. Taken out by a developer when a project starts, the policy is attached to the building itself and automatically transfers with ownership and provides cover from the date of the occupancy certificate for 10 years.
An insurance claim is triggered by discovery of a defect, physical damage and/or imminent threat of physical damage. Notably the cover doesn't require a subrogation legal claim to activate the policy, saving the developer or builder from the costs associated with defect losses.
A technical inspection service is mandatory on buildings to qualify for LDI cover. This is an independent survey of key design and construction phases and processes, monitoring and auditing the quality through the entirety of the build.
The benefits that LDI provides apply to building owners from construction to completion and provide 10 year indemnity post occupancy certificate.
Affordability: developers with a sufficient Independent Construction Industry Rating Tool (iCERT) score qualify for premium benefits.
Longevity: the 10 year life span of LDI covers current and subsequent owners after contract works liability has expired.
1st party cover: no requirement for the building owner to make a claim against building professionals who may have been responsible for the defect.
In contrast to professional indemnity insurance, which requires the building owner to make a claim against the developer or contractor supposedly responsible for a latent defect, LDI provides first party cover and is triggered when the defect is discovered.
Similarly, unlike contract works insurance which applies to damage to building works during the construction phase, LDI indemnity extends over a 10 year period after the occupation certificate is issued.
For more information about using LDI for your next new building development talk to one of our construction insurance broking experts.
Gallagher has many construction clients, from major works to smaller projects, and construction insurance specialists to advise on key covers tailored to each construction business and project.
Developers, builders or construction companies who are keen to find out more about latent defects insurance (LDI) or any other type of insurance we're here to offer expertise and advice.
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