London fire is a wake up call for Australia to sharpen up

I have recently written about the Grenfell Tower fire in London, you can read that article here, including subsequent follow up here. Specifically, I have looked at with interest the use of cladding on the outside of the building.

One of the major arising issues is the use of building cladding that was in fact banned in the UK, as well as the US and Europe. ACM stands for aluminium composite material, which is the same combustible product in use and blamed for fueling almost a dozen high-rise fires around the world in the last decade. This includes Melbourne in 2014.

This case has put the spotlight back on banned building products and how they are being used and imported into these countries, such as the UK and Australia.

Asbestos has been banned in Australia since 2003, yet we still receive reports from the Australia Border Force that they have detected, in only the 5% of cargo they test from China, 40 cargo consignments containing asbestos in the past 10 months, this number has tripled since last financial year. That is just 5% of 1.7 million containers. Clearly, the message isn’t working and more needs to be done to stop this consistent stream of cheap & dangerous products from entering our shores.

This article by Peter McRae addresses a number of points on this matter. Find the article here. 

 

 

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Interesting Blog Question on relying on a home policy for liability borne out of a contract.

I received the following question from one of the brokers I admire most when it comes to technical knowledge and commitment to the insurance industry and his clients. It is one of the few occasions I can recall taking a different view. Here is the issue:

There is a clause that is an exclusion in a Householder’s policy Liability section, which I think is being misinterpreted. It is “Any agreement or contract you enter into”, however we will cover your liability if you would have been liable without the agreement or contract.

As a result, I am getting lots of requests to quote Event Liability Insurance for things like birthday parties in a local hall or park. The Council or Hall Hirer demands they have at least $10,000,000 cover. Insurer sees that as an agreement. I point to the second part and say they would still have a common law duty of care anyway so that part should be covered, not if there was a hold harmless requirement though.

As a consequence, they cannot get certificates of currency off the insurer to provide as evidence to the property owner.

The weird thing is some policies exclude leases being part of this exclusion, others make no mention of this.

To me the intent is not to place more of the normal PL [public liability] risk on the insurers than otherwise would be, in any contract that is signed.

Of course none of these issues are picked up or interpreted in your policy comparison.  So how do you think this clause should be interpreted?

Regards

Robert [surname and email attached]

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I replied as follows:

Hi Robert,

A lot of the council and community halls require very broad protection against them, through the terms of the hire agreement/contract to the detriment of the party holder.

Let us say someone gets electrocuted or a wall collapses, someone trips over a rough edge on a step or pathway. The holder of the party would not normally be held responsible, but the contract may put the onus back on them for the duration they are there. If the contract has an indemnity clause or requires the owner of the property to be named as an insured then there can be a very real problem.

Their home owner or home contents policy would not indemnify them, or in most cases provide legal expense cover, as this liability arises solely out of the contract.

It is unreasonable in my mind that the contracts have such clauses but it is a simple case of the landlord or operator of the venue wishing to transfer the risk away from themselves to the, often unsuspecting, party holder.

There have been a couple of really big cases along this line and the party holder did not have insurance and in one major case I am aware of they sued the broker.

With some home owner and home contents policies there are blanket exclusions on any loss arising out of the consumption of alcohol and drugs. This is not illegal drugs but any drug. Either exclusion may well make the policy of no value to the Insured when hosting a party at their home or at another venue.

Another issue is that we have had a lot of problems with gate crashes who hear about the event on social media and this creates another whole problem in itself, although this seems not to have been in the news here as much as in the past or perhaps my children are now out of that teenage period (Thank goodness).

I think events liability insurance is the way to go and keep the householders policy completely out of it, the householders policy has not been designed as I see it for this type of one off risk.

Regards

Allan

PS: the whole issue of contract risk is so serious it prompted me to write my first eBook on the subject. This can be downloaded free here or you can purchase a hard copy from the publications area of the LMI Group website.

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The combustible panel issue has to be addressed before it is too late

Source: The Daily Telegraph

I was looking through my library of photos in preparing an earlier blog today and my eye was drawn to this photo of two young girls trying to escape from a fire in Sydney back in 2012. My mind immediately thought what would have happened had that, what appears to have been older building, been retro-fitted with the combustible paneling?

In that post titled. Fire Safety in High Rise Buildings a Must, I recommended anyone wishing to invest in a high rise building obtain a report on the fire safety of the building, particularly if you wish to live above the 7th floor which is about as high as the fire brigade can reach with their current equipment (It may be less in some areas).

Since London, I have spoken to a lot of people and one suggestion came from a very talented engineer was to install either sprinklers or drenches, (a drenching setup is a one goes off, they all go off system).  I questioned this as I felt it was only a band-aid solution.

Advice I received from experts in the United Kingdom, where what may appear following the Grenfell Tower tragedy, the insurance industry has been a lot more focused on the issue and fighting council and government to stop its installation. Their approach is that the sprinkler or drenching system is not the answer for the following reasons:

  • The volume of water required compared to the existing water supply
  • As it is on the exterior of the building what happens on a day of high winds?
  • The difficulty of getting the water in behind the metal cladding to the combustible insulation material.

As such, the only workable safe solution is for this type of material to be removed. There will be a significant cost but the risk as we have seen in London, Dubai and Melbourne is just too great for this material to be left.

To me, for the Metropolitan Fire Brigade to say they have a number of buildings under ‘special watch’ I think is not the answer. I, like many within the industry do not what to have a Grenfell tragedy in this country before any meaningful action is taken.

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Another broker angry at the NSW Government

I received this email last night and it mirrors many phone calls and emails I have received.

“The NSW ESL Insurance Monitor has now gazetted a new Section 30 Notice which requires premium comparisons to be provided with renewal invitations and renewal schedules for residential property insurance in NSW from 1 July 2017.”

At what point does the State Government pull their head in & stop meddling in our Industry; specifically in areas that really have nothing to do with them?

Sorry to sound aggressive Allan. It’s just that, if consumers don’t like their renewal premium, they already have ample facilities at their disposal to shop around.

Further, this outrageous new “requirement” is totally disingenuous and simply propagates comparisons on price alone. It just isn’t a good look.

Where is the Government’s warning to review the quality & extent of cover, at the same time as comparing cost?

Thanks Allan – Gary. [surname and email provided]

I could not agree more. I seem to be constantly writing to politicians, most recently Nick Xenophon explaining that insurance is not about price. It is about protection and that is what the New South Wales government completely forgets. No one remembers the price of insurance when they have a claim occur.

What they want (and need) is coverage that indemnifies them for their loss or damage and has a sufficient sum insured, limit or sub-limit high enough to meet the cost. On top of this they look for a fair and reasonable claim service that is proactive and does not take a delay, deny, defend approach.

If anyone can get all of this in one policy and assure me that insurer will not have gone to God when I need them sign me up!

Let us see this for what it really is. The New South Wales government completely messed up the transition of Emergency Services Levy from the insurance industry where it has not been in Queensland since 1985 (nor in UK since the mid 1880’s) on to property rates where it ought to be so that all the community pay it. How they messed it up when they were the last state, is beyond my comprehension and one of the best examples of incompetence in government I have ever seen. How can anyone trust them after this.

One of the oldest political tricks in the book is to move the focus off your own failings and divert it elsewhere. We are constantly being demonised by the press and government and an industry who is incapable or unwilling to fight back, so we become the fall guy and the whole nonsense with the appointment of an insurance monitor who of all people should know better is showing examples of price differences between policies that are chalk and cheese.

I think every broker and insurer should comply with the request but also show just how much the New South Wales is taking of the total cost of insurance and in particular the completely unconscionable tax on tax on tax where the New South Wales Stamp Duty on insurance is a 10% on the premium, the Emergency Services Tax, and the Goods and Services Tax (“GST”), with the GST being applied to both the premium and the Emergency Services Tax. So it becomes triple tax.

If the New South Wales Government were genuine about making insurance more affordable, which only helps protect their citizens and economy by the way, then remove the taxes which is adding over 20% to the cost of home, home contents, and business property and business interruption premiums.

PS: I would also add a how to vote for one of the opposition parties in the same envelope if they gave a commitment to remove the Emergency Services Levy from insurance.

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Does the colour of the Metropolitan Fire Brigade Helmets signal more take overs?

I noticed that the spokesperson for the Melbourne Metropolitan Fire Brigade (“MFB”) was wearing a blue helmet and the thought crossed my mind that the organisation has more on their mind than just taking over sections of the Country Fire Brigade (“CFA”).

Perhaps, the long term aim is for it to become the Metropolitan Fire Brigade and Police Force!

I am just joking of course, although the thought did really cross my mind, which is more a reflection on how my mind works and the fall out that the Andrew’s Government has created in the fire services space of late, rather than the sterling work of our fire fighters.

For the record, the blue helmet on an MFB or CFA officer signifies he or she is a Station Officer as per the chart below.

Source MFBkidzone.com.au

 

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Happy to see some relief for Insurance Taxes in NSW (unless there is yet another back flip)

The NSW Government is in line to win the Olympic Gold Medal in Back Flip Gymnastics

New South Wales Treasurer Dominic Perrottet says the state’s 2017 budget will relieve cost pressures for 600,000 small businesses in the region through the reduction of red tape, including by axing insurance duty on a range of policies for businesses with annual turnover of $2 million or less. As an aside, I am convinced governments want businesses to stay small for as soon as you grow and of course employ more people you end up paying a lot more government charges with Insurance Taxes being added to the insidious Payroll Tax.

The 2017 budget, which claims to deliver a $4.5 billion surplus, pledges to relieve cost of living pressures for families and business owners, and includes a $318 million plan to improve the viability of small businesses by removing insurance duty for commercial vehicle, professional indemnity, product and public liability, and crop and livestock insurance from January 1, 2018.

This will mean businesses with an aggregate turnover of up to $2 million will be encouraged to “take up more appropriate levels of insurance by removing the disincentive caused by higher insurance premiums”, according to the budget papers.

Insurance duty is paid to the state government by insurance providers and is calculated as a percentage of the policy premium. According to the Office of State Revenue, in NSW this can mean additional fees, which are often passed on to policy holders, range from 2.5% to 9% depending on the policy type.

Of course this is all dependent on the NSW Government honouring their word and not doing a back flip as they so cruelly did just one month out with the Emergency Services Levy.

 

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Further to my earlier post on the imported panels in the London Fire

It will probably come as no surprise to those in the insurance industry that the company that imported the panels allegedly involved in the London fire this week has had what appears to be a checked past.

It is being reported that the firm that provided the cladding for the Grenfell estate was Harley Curtain Wall, according to the Architects Journal. That firm went into administration two years ago.

https://www.thesun.co.uk/news/3802860/couple-whose-company-were-responsible-for-cladding-at-tragic-grenfell-tower-hide-away-in-1million-home/

It is alleged that Raymond and Belinda Bailey were director and secretary of Harley Curtain Wall, responsible for the £2.6 million cladding project at the block of flats that caught fire. As we see so often here, the business went bust in 2015, shortly after the work, owing creditors more than £1 million.

It was then bought by another of Mr Bailey’s firms, Harley Facades, based in East Sussex.

It this is correct it is not surprising that reports are coming through suggesting that the doors were locked at the offices of Harley Facades and that staff were ordered not to speak to the press and to direct questions to a London crisis communications firm. I am sure any innocent staff are feeling enormous stress about the incident and at the same time worried about their own future and that of their employer at this time.

What I am seeing here is that tradies are buying imported building materials such as paneling, electrical wiring and other building materials on price alone and are left holding the bag when the importer goes into liquidation. I repeat my earlier comment. It is not all about price. Think of the risk that is potentially coming your way if you install products that are non compliant.

Brokers, you guys have a role in spreading the word about the risk that they are taking on and the exposures around product recall, and rectifying faulty workmanship, particularly the exposure around the cost of replacing the faulty product which is specifically excluded under public and product liability policies.

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It is not just combustible paneling that we ought to be worried about

As readers will be aware, not only have I been writing often about the issue of combustible paneling in high and low rise apartments, but also the importation of electrical cabling that does not meet Australian Standards and also building products that contains asbestos.

I have now learned through my son Steve, who is over in London at the moment meeting our major clients, that the same block of apartments that was the scene of the tragic fire this week, (Grenfell Towers) narrowly averted a major fire disaster in 2013 when residents experienced a period of severe power surges that were subsequently found to have been caused by faulty wiring.

It is disappointing to me that the insurance industry is not leading the fight to have these products banned from being imported into Australia and insisting that buildings that contain such materials remedy the ticking time bombs.

I am aware that experts approached the Insurance Council of Australia on the issue of the paneling after the Melbourne Docklands fire and their request to work together with the industry were dismissed. This, to me, is disappointing as I believe that our industry has an obligation to our communities to assist in loss mitigation both in loss of life and property. This of course results in fewer or lower value claims, which in turn is to the benefit of the industry as well as the insuring public.

It appears that only the Victorian Government is doing something positive on the issue of the below standard paneling and without government and/or the insurance industry as a whole addressing the issue seriously then I fear it will be left a ticking time bomb until we experience a serious event in this country.

From an insured’s point of view, as the importer, distributor and or installer there is a potential exposure that may, in the case of a product recall, not be insured.

From a developer or owners perspective, like insurance itself, cost should not be the primary criteria for choice. Please make sure any building materials used conform to or exceed Australian Standards. They are there to protect YOU.

Turning back to the issue of price, do you think the people who made the decision on the cladding are now rejoicing on the saving they made by using it. Similarly, will the various organisations that will be relying on their insurance program, whether this be property, product liability or professional indemnity will be considering the premium they paid. Of course not, they will be focused on the quality of the coverage, the extent of any policy exclusions and the claims service they are about to deal with.

Food for thought when reviewing your insurance program!

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Product Safety Recalls Australia – 13/06/2017

This week’s product safety recalls include the following:

Arrow Pharma Pty Ltd — Valpam 5 (diazepam) 5mg tablets in 50 tablet blister packs

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Sandoz Pty Ltd — Amlodipine Sandoz 5mg tablets

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Edgar Edmondson Pty Ltd — Numatic Lithium Battery UN3480

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Volvo Group Australia — Mack Trucks – Trident, Super-Liner & Titan Trucks

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Regalflow Pty Ltd — Neopuzzle

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For more product safety recalls please visit: https://www.productsafety.gov.au/recalls 

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Product Safety Recalls Australia – 06/06/2017

Some of this week’s product recalls includes the following:

Sunbeam Corporation Pty Ltd — Sunbeam Sous Chef™ Stir Multi Cooker; Model MU3000

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Mercedes-Benz Australia/Pacific Pty Ltd — Mercedes-Benz “CLA” and “GLA” class passenger vehicles

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Isuzu Australia Limited — NQR series vehicles

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Wens Bros Trading Pty Ltd — Elastic Luggage Straps

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Wens Bros Trading Pty Ltd — Assorted Children’s Toys

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For more, please visit: https://www.productsafety.gov.au/recalls/browse-all-recalls 

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