Mandatory Professional Indemnity Insurance for NSW Builders by 2026

The Act mandates that builders involved in any design input on Class 2 apartment projects, or similar work under the Design and Building Practitioners Act (DBP Act), must hold PI insurance. This requirement aims to enhance accountability and ensure that builders are adequately covered against potential liabilities arising from design decisions.

Builders who fail to comply with this mandate may face significant consequences, including being barred from certain projects, breaching contract requirements, and increased exposure to claims related to design decisions. It is essential for builders to assess their current insurance arrangements and determine whether they meet the new requirements.

Common issues that have emerged include builders assuming that public liability insurance is sufficient, not realizing they have taken on design exposure, leaving PI insurance arrangements until the last minute, and lacking a plan for what happens when they stop trading. Addressing these issues proactively can help builders avoid potential pitfalls as the compliance deadline approaches.

To ensure compliance, builders should take the following steps:

• Determine if their projects fall under the scope of the DBP Act and whether they are involved in design decisions.
• Review existing insurance policies to confirm they provide adequate coverage for design-related liabilities.
• Consult with insurance brokers to secure PI insurance that aligns with their specific project requirements and risk profile.
• Develop a comprehensive risk management plan that includes provisions for PI insurance coverage.

By taking these proactive measures, builders can ensure they meet the upcoming regulatory requirements and protect their businesses from potential legal and financial risks associated with design responsibilities.