HOME WARRANTY Insurance Policy [VICTORIA] In consideration of the payment by the Builder of the premiums specified in the Schedule to this policy, the Insurer will provide insurance cover to the Building Owner, subject to the terms and conditions set out in this policy, and in compliance with the Parts 2 and 4 of the Ministerial Order issued pursuant to Section 135, 137A and 137D of the Building Act 1993 [Victoria] and dated 20 May, 2003, and subject to the governance of the law of the State of Victoria. A : COVERAGE A1 The Insurer will, during the period of insurance specified in the Schedule to this policy, indemnify the Building Owner in respect of loss or damage resulting from: a. non-completion of the domestic building work; b. domestic building work that is defective; c. a breach of any warranty implied in the domestic building contract by section 8 of the Domestic Building Contracts Act 1995 [see Definitions : Warranties below]; d. a failure to maintain a standard or quality of building work specified in the domestic building contract; e. conduct by the builder in connection with the domestic building contract that contravenes a trade practices provision; f. loss of the deposit [or any part of the deposit] or loss of any progress payment under the insurable domestic building contract. g. the costs of alternative accommodation and removal and storage costs that are reasonably and necessarily incurred subsequent to and as a result of any event referred to in clause [a] to [e] of this clause A1. A2 The indemnities referred to above include an indemnity in respect of the acts or omissions of all persons who were contracted by the Builder to perform the domestic building work under the insurable domestic building contract resulting in loss or damage of the kind referred to in clause A1.a to A1.g] inclusive. B : LIMITATIONS B1 B2 B3 B4 B5 B6 B7 B8 The indemnities referred to in clause A1 only apply if the builder dies, becomes insolvent or disappears. Claims for loss referred to in clause A1.g are limited to a period of alternative accommodation or storage of 60 days, excluding any period or periods of delay attributable to the insurer. The maximum aggregate liability of the Insurer under this Policy shall be limited to not less than the aggregate amount of $200 000 for all claims in respect of any one home, including reasonable legal costs and expenses incurred by the Insured (not being the Builder or Owner Builder) associated with the successful claim against the insurer. The liability of the Insurer as a result of non-completion of the Works by the Builder pursuant to clause A1.a shall be limited to the cost of completing the Works but in any event shall not exceed twenty per cent [20%] of the Contract Price. The liability of the Insurer for loss or damage resulting from the conduct of the Builder pursuant to clause A1.e herein shall be limited to the cost of rectifying the damage to the Works. The Insurer shall not be liable for any additional loss or damage caused by the delay on the part of the Building Owner in notifying the Insurer or the Builder of a fact or circumstance giving rise to a possible claim. If the Works are subject to the Subdivision Act 1988 [Victoria], and a claim is paid by the Insurer in respect of common property of the property or multiple complex, then the amount of cover shall be reduced by an amount equal to the amount paid under the claim, divided by the number of homes comprising the complex. Where the damage or loss under this policy is also covered by any other policies of insurance or indemnity agreements, then the liability under this policy shall only provide indemnity in excess of the amount for which the Building Owner is entitled to indemnity under such other policies or indemnity agreements.
C : EXCLUSIONS C1 The Insurer shall not be liable for any claim for loss or damage: a. for money paid to a builder that exceeds the amounts that should have been paid to the builder in accordance with section 11 and (as the case requires) section 40(2) or section 40(3) or section 40(4) of the Domestic Building Contracts Act 1995. b. for penalties, fines, liquidated damages or other sums, if any of these relate to delay on the part of the Builder. c. for non-completion of building work if the death, insolvency or disappearance of the builder occurs before the builder commences on the building site any domestic building work (other than the removal of vegetation) that requires the use of any tools or building materials, but subject to a right of the Building Owner to recover any money paid in relation to the domestic building contract and all reasonable costs and expenses incurred by the building owner in relation to the contract. d. by a building owner who is a developer for non-completion of building work. [This exclusion does not affect any rights under the policy of any subsequent owner for the time being of the building or land in respect of which the domestic building work is being carried out]. [but the foregoing exclusions shall not apply to any claims under clauses A1f and A1g of this Policy] e. arising from any malfunction in any electrical or mechanical appliances except where the malfunction is attributable to the workmanship or other fault of the Builder as part of the Works; f. in respect of work performed outside the State of Victoria, or work to which the Domestic Building Contracts Act 1995 [Victoria] does not apply; g. relating to landscaping, paving, retaining structures, driveways or fencing [but this exclusion shall not apply if those works: (c) (d) (e) (f) are integral to the construction of a building; or require the issue of a building permit under the Building Act 1993; or could result in water penetration of or within a building; or could adversely affect health or safety; or adversely affect the structural adequacy of a building; or are not completed and the builder has died, become insolvent or disappeared.] h. from an event which is normally covered by a policy of general insurance; i. arising from any seepage, pollution, rot, mould, contamination, war [whether declared or not], invasion, rebellion, nuclear radiation, or expropriation, confiscation or nationalisation by or under order of any Government, Public, State or local authority; j. arising from exposure to natural timbers, or the normal drying out, or any other fair wear and tear, of the Works; k. arising from, or made worse by, the failure of the Building Owner to employ and maintain reasonable action or protection measures to minimise any loss or damage from termite or other pest infestation; l. arising from an act of God, or act of nature, the force of which exceeds that allowed for under any Australian Standard, or good building practice; m. arising from any personal injury; n. for loss of use, or any consequential loss of any kind, except as provided in clause 4 herein; o. arising from a contractual dispute between the Builder and the Building Owner, except where otherwise specifically covered under this policy; p. due to fair wear and tear of the domestic building work or the failure by the insured to maintain that work. q. arising from conduct of a builder that contravenes a trade practices provision to the cost of rectifying the relevant domestic building work. 2
C2 C3 This policy does not apply to a contract for the demolition of a home or building on land zoned for residential purposes, by a person registered under Part 11 of the Building Act 1993. The Insurer shall not be liable in respect of any claim by a Building Owner if the Building Owner is: a. where the builder is a natural person, the builder or a relative of the builder; or b. where the builder is a partnership, a present [or former] partner of the builder or a relative of a present [or former] partner of the builder; or c. where the builder is a company, the builder or a related body corporate or a related entity of the builder or a relative of any [past or present] director or shareholder of the builder, with the terms relative, related body corporate and related entity having the meanings ascribed to them in Section 9 of the Corporations Act 2001. D : THE PERIOD OF INSURANCE D1 D2 The period of insurance shall be: in respect of non-structural defects in respect of loss or damage occurring during the period commencing on the commencement day and ending not earlier than 2 years after the earlier of: [a] [b] the completion date of the domestic building work; and the date of termination of the relevant domestic building contract. D3 in respect of all other loss or damage occurring during the period commencing on the commencement day and ending not earlier than 6 years after the earlier of: [a] [b] the completion date of the domestic building work; and the date of termination of the relevant domestic building contract. E : CLAIMS E1 The Building Owner must: a. notify either the Builder or the Insurer promptly in writing upon becoming aware of some fact or circumstance that may give rise to a claim under this policy. The Insurer shall not be liable for any additional loss or damage caused by the delay on the part of the Building Owner in notifying the Insurer or the Builder of a fact or circumstance giving rise to a possible claim, and will not be liable for any loss or damage where the Building Owner does not make a claim within 180 days of first becoming aware of the fact or circumstance giving rise to the possible claim; b. comply with the reasonable directions of the Insurer, and take reasonable precautions to avoid or minimise loss or damage under this policy; c. not undertake any remedial or rectification works without first notifying the Insurer, unless the works are necessary to prevent further loss or damage; d. provide the Insurer or any person nominated by the Insurer with reasonable access to the building or building site for the purpose of inspection and rectification or completion of the Works [Provided that the Insured has the right on reasonable grounds (including loss of confidence in the builder) to refuse to provide the access to a builder nominated or approved by the insurer]. e. facilitate the subrogation of its rights to the Insurer, and, if required by the Insurer, shall prosecute any claim for indemnity or damages to recover amounts paid by the Insurer to the Building Owner, or any other party; f. not admit, exclude, or limit its rights against the Builder or any other party, or settle or defend any claims without the prior written approval of the Insurer; 3
g. allow the Insurer [at the option of the Insurer], to take full conduct of any proceedings on behalf of, or against the Building Owner, and must provide all information and assistance, which the Insurer may reasonably require, for such proceedings. h. upon becoming aware of any default by the Builder, or of any circumstances which might lead to default by the Builder, NOT pay any further money to the Builder, its administrators, receivers, liquidators, or assigns. E2 E3 E4 Notwithstanding the foregoing the Insurer may not reduce its liability to the insured by reason of a failure on the part of the Insured to comply with a requirement imposed pursuant to clause E1 unless and only to the extent that the Insurer can prove that the failure increased the liability of the Insurer under this Policy. The Insurer shall not be liable for any loss or damage where the Building Owner does not make a claim within 180 days after the date on which the claimant first became aware, or might reasonably be expected to have become aware the fact or circumstance giving rise to the possible claim. The Insured (not being the builder or the owner builder) shall bear at the Insured s own risk: (c) (d) an excess of not more than $1000 in respect of a claim made after 5 years after the completion date; an excess of not more than $750 in respect of a claim made between 3 and 5 years after the completion date; an excess of not more than $500 in respect of a claim made between 12 months and 3 years after the completion date; a claim under $500 made between 3 months and 12 months after the completion date. E5 E6 For the purposes of clause E4 a claim of $500 or more may relate to more than one defect if the amount claimed for any one or more defects is less than $500. The date when a claim is made is the earlier of: the date when the claimant first notifies the insurer of a circumstance that may give rise to a claim; and the date a claim is made. E7 But the Insured shall not be required to bear an excess in respect of loss or damage arising between (i) (ii) (ii) the date of the Contract or the date of issue of the building permit for the relevant domestic building work, whichever is the earlier; and the date that is 3 months after the completion date; or if the loss or damage relates to non-completion of building work. E8 An excess may be applied only once in relation to: any claim comprising more than one defect; or 2 or more claims that relate to the same defect. F : GENERAL F1 F2 The Insured must take reasonable precautions to avoid or minimise loss or damage covered by this Policy The Insurer may, at it sole option, meet its obligations or any part of them, by arranging an alternative builder to carry out or complete the Works. 4
F3 F4 This policy is issued in compliance with the Order and if any term of the policy conflicts or is inconsistent with the Order then the policy must be read and be enforceable as if it complies with the Order. If the insurer has notice of the relevant proceedings before the Tribunal, the insurer will accept as determinative of the issues any finding made by the Tribunal: as to whether any of the following events has occurred (i) (ii) (iv) the non-completion of domestic building work; an event referred to in clause 8(2) to (d) of the Order; an event referred to in clause 9 of the Order; and if so, as to the amount of loss or damage suffered by the building owner or purchaser, as the case may be, as a result of the event or events. F5 The Insurer may not avoid the policy or refuse to make or reduce any payment under the policy on the ground that: the builder or owner builder, as the case may be (i) (ii) (iii) (iv) (v) breached any duty of the utmost good faith; or failed to comply with any duty of disclosure; or made representations to the insurer; or failed to comply with a provision or requirement of the policy; or by act or omission of any description prejudiced the interests of the insurer; or the premium or any instalment of the premium has not been paid. F6 F7 F8 F9 F10 F11 If the Insurer makes a payment under the policy in circumstances to which clause F5 applies, the insurer is entitled to recover from the Builder or Owner Builder, as the case may be, any amount so paid. If the Insurer has not determined a written claim as to liability within 90 days of receipt of the claim, then, unless the Insurer obtains an extension of time from the Insured or the Tribunal, the Insurer is to be deemed to have accepted liability for the claim. If a person gives the Insurer notice of a defect, that person is to be taken for the purposes of the policy to have given notice of every defect to which the defect notified is directly or indirectly related, whether or not the claim in respect of the defect that was actually notified is settled. The Insurer acknowledges that section 54 of the Insurance Contracts Act 1984 (insurer may not refuse to pay claims in certain circumstances) of the Commonwealth applies or is deemed to apply to the Policy. Despite the provision referred to in clause F9 if the person making a claim against the Insurer has notified the Insurer in writing, within 180 days after the date when the claimant first became aware, or might reasonably be expected to become aware, of the death, disappearance or insolvency of the builder, then the Insurer will not rely on section 54 of the Insurance Contracts Act 1984 to reduce its liability under the policy or to reduce any amount otherwise payable in respect of a claim made by reason only of any delay in a claim being notified to the Insurer. The insurer will notify the Building Practitioners Board at the times and in the manner agreed with the Board, in the event that: the builder is refused insurance, ceases to be eligible to renew or procure insurance or, in respect of domestic building work performed prior to the commencement of this Order, fails to purchase or maintain required insurance; and any claim under a policy of required insurance is settled or paid by agreement or otherwise. F12 The insurer must provide a Certificate of Insurance, in the form or to the effect of the form contained in either Schedule 2 or Schedule 3 to the Order (as the case may require) and evidencing that a policy has been issued in compliance with this Order in respect of each home for which insurance is required: 5
to the insured immediately on the issue of the policy; and on request by the builder, owner builder or insured at any time. F13 The Insurer may, on the giving of 30 days notice in writing cancel the cover provided under this policy to the Building Owner if the Building Owner; a. makes a false, fraudulent or misleading claim under this policy; b. breaches its duty of utmost good faith to the Insurer; c. agrees to the cancellation following termination of the Contract that required the issue of this policy. The cancellation shall take effect thirty [30] days after the Insurer gives written notice. F14 Every notice or communication to the Insurer shall be in writing and sent by mail or facsimile to the office of the Agent of the Insurer: Contractors Bonding Limited Level 9, Tower One 51 Shortland Street PO Box 3772 Auckland New Zealand Phone (Toll Free) 1800 617 457 Fax : + 64 9 300 5046 Email : inquiry@contractorsbonding.com and shall not be deemed to be notice to or with the knowledge of the Insurer unless so given. If the address of the Insurer s agent above ceases to be its address, then such replacement address as is published by the Agent will be the new address for notification or communication to the Insurer. G : DEFINITIONS Builder means the builder specified in the Schedule herein. builder, building, building site, domestic building work, and home shall have the same meaning as those terms defined in Section 3 of the Domestic Building Contracts Act 1995 [Victoria]. Building Owner means the person for whom the domestic building is being built under the Contract, and as named on the Schedule herein, and specifically excludes the Builder, any Owner/Builder, and/or a Building Owner that is related to the Builder [as defined within Section 50 of the Corporations Law but otherwise includes [a] each person who becomes entitled to the benefit of any of the Warranties; and [b] the owner for the time being of the building or land in respect of which the domestic building work is or was being carried out. claim[s] means where the context permits, a claim made by the Building Owner under this policy completion date, and construct shall have the same meanings as those terms defined in Section 137B of the Building Act 1993. Where the completion date cannot be determined under that definition, and notwithstanding that a certificate of final inspection or occupancy may subsequently issued, it shall be the latest date that the Builder attended the relevant building site for the purpose of handing over possession to the Building Owner, or for the purpose of completing the Works, provided however that if the date still cannot be reasonably ascertained, then the completion date shall be: in the case where a building permit has been issued for the Works, a date 12 months from the issue of the building permit; or in the case where no such permit has been issued for the Works, a date 12 months after commencement of the Works. 6
Contract means the domestic building contract entered into between the Builder and the Building Owner for the carrying out of the Works, and is referred to in the Schedule herein, developer means any Building Owner for whom three [3] or more homes are being [or are proposed to be built], on one building site, or on more than one site, but under one Contract. Insurer means Exporters Insurance Company Limited a duly incorporated company having its registered office in Bermuda, and whose address for the purpose of this Policy is at the offices of Contractors Bonding Limited, Level 9, 51 Shortland Street, Auckland, New Zealand. Ministerial Order means the Ministerial Order # S98 made on 23rd May 2003 which took effect on 1 st July 2003. Owner Builder means a builder in relation to domestic building work to whom Section 137[2] of the Building Act 1993 applies and includes a mortgagee in possession from such owner builder, or the executor or administrator of the estate of such owner builder. Personal Injury means bodily injury, death, sickness, disease, shock, fright, mental anguish, false arrest or imprisonment, wrongful eviction, wrongful detention, malicious prosecution, humiliation, libel, slander, or assault or battery. Property Damage means physical injury to or destruction of tangible property including the loss of use; and/or loss of use of tangible property which has not been physically injured or destroyed provided that the loss of use has been occasioned by an Occurrence. Schedule means the schedule of this policy. Tribunal means the Victorian Civil and Administrative Tribunal established by the Victorian Civil & Administration Tribunal Act 1998 [Victoria]. Warranties means the Builder s warranties implied into domestic building contracts by section 8 of the Domestic Building Contracts Act 1995, namely that: [a] the work will be carried out in a proper and workmanlike manner and in accordance with the plans and specifications set out in the contract; [b] all materials to be supplied by the builder for use in the work will be good and suitable for the purpose for which they are used and that, unless otherwise stated in the contract, those materials will be new; [c] the work will be carried out in accordance with, and will comply with, all laws and legal requirements including, without limiting the generality of this warranty, the Building Act 1993 and the regulations made under that Act; [d] the work will be carried out with reasonable care and skill and will be completed by the date [or within the period] specified by the contract; [e] [f] if the work consists of the erection or construction of a home, or is work intended to renovate, alter, extend, improve or repair a home to a stage suitable for occupation, the home will be suitable for occupation at the time the work is completed; if the contract states the particular purpose for which the work is required, or the result which the building owner wishes the work to achieve, so as to show that the building owner relies on the builder's skill and judgment, the work and any material used in carrying out the work will be reasonably fit for that purpose or will be of such a nature and quality that they might reasonably be expected to achieve that result. Works means the domestic building work required pursuant to the Contract. All sections of this policy including the Schedule are construed as one document. Headings are for reference only and do not affect the meaning of any provision of the policy. Any reference to the headings is to be construed as a reference to the provisions of that section of the policy. Words in the singular include the plural; in any gender include the other gender; and person includes any incorporated or unincorporated entity. Definitions and defined terms contained in the Domestic Building Contracts Act 1995, the Ministerial Order, and the Building Act 1993, shall be imported into and form part of this Policy. 7
SCHEDULE Builder: Address: Contract: Site Address: Domestic Building Contract dated Building Owner: Address: Commencement Day: Contract Price: A$ Certificate Ref #: Insurer: Exporters Insurance Company Limited Care of PO Box 3772, Auckland, New Zealand Exporters Insurance Company Limited is underwriting this policy of Insurance as a foreign unauthorised insurer, and accordingly is not subject to the provisions of the Insurance Act 1973, and is obliged to bring this matter to your attention. 8