Following the sale of 2 properties, the Insured was required to make a payment of $400,000 to their property consultant. On the day the payment was due, the Insured received an email from the consultant advising their banking details had changed. The Insured requested that this be sent to them in writing on the consultant’s letterhead which they received, including the signature of the director of the consultancy company. The Insured was later chased by the consultant for payment at which time it was discovered that the email and letter had been fraudulent. The Insured contacted their bank to stop the payment and were informed that the money had already been withdrawn and transferred overseas.
Outcome
The Insured made a claim on their Cyber policy which triggered the optional Social Engineering cover. An IT forensic consultant was appointed who identified that the hacker had infiltrated the consultants system and intercepted correspondence between the Insured and the consultancy firm. The Insured was reimbursed for the outstanding funds (capped at the Social Engineering sub limit of $250,000).
What are the key risks in the building and construction industry?
Construction projects involve multiple stakeholders and are often undertaken on challenging sites. Construction businesses must often manage changes to scope or orders, poorly written contracts and specifications and complex project management issues. They may need to deal with labour and materials shortages, or theft of tools and materials.
Subcontractors and suppliers can provide extra stress for construction firms, as can the rising number of extreme weather events. What’s more, cybercrime is an emerging threat to construction businesses, which often use insecure
connections from mobile workplaces, and share files and data with stakeholders outside the business.
Who should consider insurance?
Whether you’re an owner builder, a contractor or a large construction company, you’ll need a range of insurance covers to safeguard your workers, building and equipment.
“The construction industry generates over $350 billion in revenue, producing around 8% of Australia’s Gross Domestic Product, and has a projected annual growth rate of 2.5% in the next five years.” Australian Industry and Skills Committee, Construction, 2020
Did you know?
12,600 – The average number of serious claims per year over the last 5 years. (Safe Work Australia, Construction Industry Profile, 2015)
The construction industry had the fourth highest rate of serious claims in 2012-13. (Safe Work Australia, Construction Industry Profile, 2015)
What insurance should you take out – and what can it cover?
Insurance can protect you and your employees onsite, on the way to work and in your office.
Contract works
Protects any buildings under construction and construction equipment. This cover may include protection against:
• natural disasters like fire, earthquake, storm, flood, wind and water damage
• damage to property caused by defects, theft and malicious damage or vandalism or smashed glass
• third-party personal injury and property damage.
Business pack
Safeguards your business premises against:
• equipment or machinery breakdown
• employee dishonesty
• property or glass damage
• legal issues, with public and products liability
• tax audit
• theft, and theft or loss of money.
Cyber
Safeguards you and your business against expenses and legal costs if your website or other systems are hacked and your system cannot be used or customers’ details are stolen.
Motor Insurance
Takes care of your valuable business vehicles with cover to:
• help if you or your staff damage another person’s vehicle
• repair your vehicle after an accident or replace it if it’s written off
• replace a lost or stolen vehicle
• safeguard you against legal liability
Professional Indemnity
Protects you against legal action from a client for breach of professional duty. This
type of insurance is often required by building contracts.
What usually isn’t covered?
Exclusions, the excess you need to pay and limits of liability can vary greatly depending on your insurer and the requirements of your business.
A female carpenter was contracted to a building company to provide a service. Part of her duties involved being on site with a team of other workers, most of whom were male. A complaint was made to the Australian Human Rights Commission where she alleged that her supervisor sexually harassed her over the duration of her employment by touching her inappropriately and making inappropriate comments. She refused to return to work after reporting the incident to the building company on the grounds that she is suffering major depression as a result of the alleged sexual harassment. She made a workers’ compensation claim due to her alleged inability to return to work. She also lodged a complaint against both the company and her supervisor with the Australian Human Rights Commission seeking approximately $160,000 in compensation plus future damages.
Outcome
It was deemed that the insuring clause was triggered. The matter proceeded to a conciliation at the Australian Human Rights Commission. The Claimant and the Insured agreed at conciliation to resolve the complaint by updating the anti-discrimination policy in the workplace, and providing a settlement.
Payment: $450,000 fine plus, $100,000 in defence costs
Background
An employee electrician contracted by the insured electrical contracting company was inspecting wiring on a building site. During the inspection, the contractor suffered severe electric shock whilst inspecting the wiring. It was later discovered that certain precautions were not followed on site. The employee was left with severe burns to his right arm and face. The insured company was subject to a formal Occupational Health and Safety investigation and prosecution.
Outcome
It was determined that the Insuring clause of the Policy was triggered and indemnity was extended to the Insured. The company vigorously denied and successfully defended the most severe allegations allegations. Despite their attempt at defending the claim, the company was fined for the negligent actions of their employees.
Payment: $450,000 fine plus, $100,000 in defence costs
Payment: $120,000 fine plus, $130,000 in defence costs
Background
A team of 3 plumbers were contracted to attend an industrial building site in Western Australia to undertake certain tasks in the overall building project. The team consisted of new recruits who were new to the job. Unfortunately, on the first day of the project, two of the novice electricians were seriously injured. One contractor suffered a deep laceration on his hand whilst the other contractor lost partial hearing in his left ear due to failing to wear the safety equipment correctly. A formal Occupational Health and Safety investigation began which eventually led to the company being prosecuted.
Outcome
It was determined that the Insuring clause of the Policy was triggered and indemnity was extended to the Insured. Following a two day hearing, the company was found liable and was fined.
Payment: $120,000 fine plus, $130,000 in defence costs
A large gardening business sued the owners of a small family owned gardening and horticultural company for $445,000 after its retail manager left to join the insured business. The competing company alleged theft of trade secrets and claimed that the retail manager was still in their employment when they began sharing proprietary information with the Insured.
Outcome
It was determined that the Policy was triggered and indemnity was extended to the Insured. The claim proceeded to hearing and was settled at mediation.
