VCAT and Insurance Claim

Hi all,

I thought I would start a thread to share my experience in making a claim on Domestic Building Insurance (DBI) after a builder failed to complete a construction project.

I share the below experience to benefit others, and for individuals to understand the risks they inherit when entering into a contract with a builder. It is from this experience that I have realised that the building industry is in need of significant reform – consumer protection is weak, the law is slow and expensive, and the mandated DBI insurance scheme is not designed to protect consumers.

In my humble opinion I believe that the average person/family would have been bankrupted by the below experience. I’m fortunate I can share this experience with you and have a roadmap to recoup significant costs. This has only been possible due to a day job that affords me a salary that has facilitated the coverage of cost over runs + 18 months holding costs + professional legal and QS advice + lost rent + resolving defects. For this I am very grateful.

Background:

• Engaged Builder A to construct multiple dwellings on a property in VIC.
• Part way through construction Builder A began operating without a builders license and without any site insurance. In addition, Builder A ran out of money and project incurred multiple time delays. As a consequence of breach of numerous contractual clauses, a breach notice and subsequent contract termination notice were issued by my lawyer.
• Properties were subsequently completed by Builder B with my personal cash reserves, at significant additional expense.
• Properties have significant defects from Builder A which have not been rectified (estimated $400k+ defects). These defects are QS verified.
• Mandatory Dispute Resolution, a requirement in Victoria before insurance claim or VCAT, was quickly and easily found in my favour.
• Insurer has rejected claim due to not satisfying one of 4 technical criteria under the DBI policy, being: 1) Death of builder; 2) Disappearance of builder; 3) Insolvency of builder; or 4) VCAT ruling.

Current Status:
I am currently engaged in a protracted VCAT process in order to obtain a ‘VCAT ruling’ against Builder A. This will then enable a claim under DBI for all costs incurred along with rectification of all defects. Costs/rectifications being sought are $500k+.

I am happy to answer questions and happy to provide updates as I progress.

 

geez, what a mess,

good luck! I hope this is not going to end up as one of the "you got the ruling you wanted, but the builder is eithe bankrupt or a shelf company"

 

I'm sure you've been tempted to make Item 1 and 2 occur simultaneously often

Having gone through the Western Australian process last year myself I can send you my sympathies. Your process is harder BUT our insurance coverage is only for $100k which is ridiculously low and easily eaten up by the increased costs by Builder B to take on Builder A's work.

Thankfully mine has only set me back 4mths in the project and I was able to find a builder to take on the work who started prior to insurance payout on the proviso that I would personally pay until the payout.

 

Whilst i expect to get a VCAT order in my favour i don't anticipate receiving any funds from the builder. The VCAT order gives me the ability to make a claim on the insurer for all the costs and defects. That's the end game.

Thanks for the good luck!

 

Wow. $100k is very low! A significant portion of that could be eaten up by legal and QS costs, in my instance around $30k to date. Here in Vic it is $300k cap per property. I fortunately have separate insurance policies for each property.

You have done exceptionally well to only incur a 4 month delay, congrats!. Unfortunately I was unable to get insurance to step in and complete, or fund the remaining construction. However, I was fortunate to be in a position to fund with cash reserves.

It is sad that I could have had a partially completed property being ruined by wind/rain/exposure whilst an insurer fought to not pay out on the basis of technicalities. That sort of stuff bankrupts people.

thanks for your post!

 

Update on my VCAT claim against my builder.

I attended a VCAT directions hearing end of Feb. This is a hearing in which the applicant (me) and the respondent (builder) are required to attend in order to determine relevant orders. Essentially it is a meeting to determine the next steps, what independent reports will be prepared, and timeframes to next hearing/tribunal etc.

I was not surprised that the builder did not turn up. He has also not responded to any legal correspondence.

Fortunately the VCAT member is taking steps to finalise the matter ASAP. The builder has been ordered to provide his defence with 30 days. Should the builder not file a defence the VCAT member will immediately refer the file to the tribunal for a determination of damages/costs.

At this stage VCAT process is looking to be wrapped up by May. It will be at this stage I will be able to make a claim on the Domestic Builders Warranty Insurance.

Another step forward in the right direction!

Cheers

 

Update on my VCAT process against my builder.

Builder did not respond to any legal correspondence sent via email, registered mail to company address, registered mail to director address, or phone. As such, VCAT has ruled in my favour. Hearing date has been set in a month's time to determine the quantum of damages to be awarded.

I have tendered expert reports relating to the cost over runs caused by builder defaulting on contract, building defects, and QS costings to rectify defects. Claim is substantial and in multiple of hundreds of thousands.

There is nil/minimal chance that i will see a cent from the builder. However, I need this VCAT outcome in order to progress on the VMIA/Builder Warranty Insurance claim.

Slow but positive progress!

Cheers.

 

I feel your pain, Picket Fence. After the 2011 floods, our home was condemned due to structural damage, and the insurer tried to claim that the structural damage was pre-existing. Interesting, because the same insurer had paid a significant claim from storm damage - $200K - less than two years earlier, and during those extensive works, nothing was mentioned about any structural deficiency, either by the insurer's assessor, structural engineer, or their builder.

Long story a bit shorter: I eventually won a high 6-figure payout, but it took 2 1/2 years during which we had to pay for our rent in alternative accommodation, and fund expert reports and legal costs - ie it cost us about $150K to fight.

Most people wouldn't have been able to afford to fight, but if we hadn't, we'd have been bankrupted.

It's completely unjust that you can have the right insurance (we specifically had a flood cover policy!), and through no fault on your part, be bankrupted anyway, because of the cost of fighting to get what you're entitled to.

This was set me on the path to studying law, and I just got admitted last year, in my late '40s.

 

the world is so unfair, the ones who get screwed over , have to do all the work, and still may not even be covered fully
and yet we have lawyers too

 

Picket fence my heart goes out to you .insurance in General in this country is structurally broken includind TPD insurance claims, that is another story
As you probably aware i am in the process of doing my first project ,even though its only a single storey 3bv 170m2
Being a defensive pessimist, i am being extra cautious when it comes to picking my builder, of course there are no guarntees
One of the many criteria is ,i want a medium to large builder ,well established, referenes and bank statements are another and how long has the company been in the building industry
Is there anything else i should add to the list
Thanks

 

Congratulations, @Perp

So pleased to hear that you achieved your goal. I recall how hard the road you travelled was, and the toll it took on you and your family.
Marg

 

Thanks, @Marg4000 and @The Y-man. It certainly was a difficult journey, but I made lemonade out of lemons. Maybe...

 

Latest update.

The VCAT hearing regarding the 'quantum of damages to be awarded' has occurred. Unsurprisingly the builder did not attend the hearing. The judge made an order against the builder for all defects/costs/damages as evidenced and detailed in my claim. The sum of the order is in the multiple hundreds of thousands.

The order has been served on the builder. However, I will not see any money from the builder. Once the builder defaults on the order I will then be able to start the insurance claim process on Domestic Building Insurance (DBI).

Here is hoping I don't have another fight on my hand with the insurer!

Cheers,
Picket Fence

 

I hope you meant admitted to the bar @Perp, although you have been through so much it may have led to a weaker person being admitted to the asylum.

 

Well done. Hopefully the insurer now has grounds for paying the claim with the VCAT hearing. Do you have legal representation that confirms that the decision is one which complies with the insurance requirements ?. Hope no defects in wording are cause to revisit the decision and seek any revision.

 

What a nightmare, hopefully the morons at the state level ,will finally get their act together and put in place the necessary checks and balances in the building industry to make cowboy builders accountable

 

Come to NSW where they can build a humpy and have no apparent liability for defects. Should be a rule that holds the council and builder liable for defects. Watch the standards improve.

 

Judgements is one thing , getting the $$$ is another

So #Picket fence, are you likely to get all these judgevents paid out?