In June of 2017, more than 70 people died when a rapidly-spreading fire, largely believed to be exacerbated by cheap cladding, at the Grenfell towers in London.
Both authorities and insurers around the world were quick to react. Victoria and New South Wales both introduced taskforces to identify buildings with potentially combustible cladding and work with local councils and private property owners to establish risk and work towards remediation.
The Victorian Taskforce found that there have been significant safety risks and widespread use of non-compliant cladding. In NSW, a preliminary audit identified more than 1,000 buildings requiring further investigation.
The next step following the identification of the buildings is remediating them, leading to the obvious question of who will pay for it?
Insurance companies have started raising premiums on affected buildings in some cases, and others are reluctant to insure where they’re aware of the cladding being present, which is further complicated by owners or strata groups seeking to claim against their insurance for the presence of non-compliant cladding.
The response from the insurer will vary from state to state. In NSW, owners corporations will hold insurance as required under the Strata Schemes Management Act, and those policies may respond to some of the losses arising from remediating cladding.
The challenge is that when the presence of cladding is revealed, insurers may respond with significantly increased premiums or excess, with some reports of insurers refusing to insure at all.
The risk to safety is an obvious point to consider in terms of affected buildings, but the remediation costs, which often run into the millions for complexes, are another point. One expert explained that while the onus of insurance lies with owners corporations, third parties may be liable including developers, builders and insurers.
Experts are largely recommending that users who believe they may be affected check with development records and construction documents to determine whether cladding is made of the panels of concern.
Of course, taking the time to consult with your insurance broker, particularly in regard to meeting your obligations in terms of informing insurers, and appropriate risk mitigation strategies where applicable. Ensuring the accuracy of the information passed onto the underwriter will likely prevent a claim declinature due to non-disclosure, so the more information you can provide, the better.