Recent PI claims against Builders

Construction Management Claims by Principals where the Builder is responsible for the Professional Input of Others

The Plaintiff entered into a contract with a builder to renovate her house. The renovation works included the re-stumping of the house. The builder sub-contracted the re-stumping of the house. The re-stumper requested the Surveyor to provide a building permit in relation to the re-stumping.The Plaintiff claimed that the re-stumping works were defective and sued the builder. The builder joined the re-stumper and the Surveyor to the proceedings.The case settled as the builder went into liquidation and the re-stumper had no insurance and no money. The Surveyor paid $20,000 as he had not adequately checked the depth of the stump holes for the re-stumping of the house.
Insurers seeking Contributors to their Claim Payments

A workers compensation insurer brought an action against a  builder who had designed and built a simple amusement ride.  An employee of the Amusement Park had injured their back and received a $600,000 award for injuries allegedly caused by the faulty design of the ride.

Builders incur Defence Costs when joined into an Action against a Professional
A builder has been joined in an action against a design consultant who alleged they were not at fault for the collapse of a sewerage system.  The builder thought they could rely upon the consultants Professional Indemnity Insurance however, those insurers proved hostile.While the builder liquidity is threatened by the extensive legal costs involved in proving their innocence

Buildings Not Matching Plans

A Builder constructed an apartment block according to plans.  When it came to construction of the balconies, the builder slightly modified the size of the balconies due to practical construction requirements.  The buildings were sold off the plan and, following construction, some investors used this slight difference in layout to avoid completing their purchase.  The Owner sued the Builder for considerable financial losses.

Insurers blaming Builder for Sub-consultant Error

An Architect was employed to assist on the rectification of a heritage stone cottage.  During construction extensive sandstone was used.  After construction the sandstone began to break down and an expert’s report noted that the particular stone used was unsuitable for use in buildings near to the sea.  The Architect’s P.I Insurer sued the Builder for $1,000,000 for his selection of the sandstone.  The uninsured Builder consequently went into liquidation.

Design Error

A Builder was contracted to design and construct a shopping mall.  A steep ramp which diverted at the base lead from the rooftop car park to the first mezzanine floor shopping area.  There was a balustrade constructed at the base of the ramp.  A pedestrian running down the ramp fell over the balustrade and down to the ground floor causing serious injury.  The Builder argued that the balustrade was constructed according to Australian Standards.  Legal advice stated that the Australian Standard was the minimum and the balustrade should have been built higher due to the nature of the decline.

Liquidators blaming Cost Over-run on Builders

A speculative multi-million dollar development went into liquidation.  Liquidators brought an action against the builder alleging under-design and negligent responsibility for cost over-runs which allegedly contributed to the liquidation.  Liquidators have now been appointed on behalf of the Builder.

Design & Construct Builders Claim Examples

Claims Examples

Design Construct Builders

Case A

A building surveyor was engaged to issue a building permit and the required certificates, including the final Certificate of Occupancy for a residential construction. Some years after completion of the house, the owners noticed significant movement and cracking. The owners sued the building surveyor and the home warranty insurer. The building surveyor then joined engineers, the manufacturer of the footing system, the installer of the footings and the building company.
The allegations against the building surveyor were that he was negligent in issuing the permit and certificates because he should have recognised the deficiencies in the various engineering plans, designs and computations. He asserted that it was not the role of a building surveyor to check such documentation, rather, his duty was to certify that the steps required under the Building Act had been carried out by the appropriate registered building professionals.
The building surveyor had also obtained a compliance certificate prior to the consultation and was therefore granted statutory immunity.
Responsibility for the design flaw was passed to the building company who alleged that the flaw in design was caused by the engineers.
The building company had no insurance for design issues and could therefore not continue to fund the legal costs proving it was the engineers fault.
After four years of litigation the claim settled for over $1million plus legal costs, with a substantial contribution from the building company.

Case B

Design Errors in Bridges & Personal Injuries
Arthur & Co (“Arthur”) is an engineering company whose business includes the design, fabrication and supply of steel bridges. A product commonly sold by Arthur is a bolted steel truss bridge, which it describes generically as a unit construction bridge (UCB). Arthur would sell these steel bridges specifically designed for various projects and arrange for their construction. In May 2006, the New South Wales Government commissioned Arthur to design, fabricate and construct three steel bridges for the government. The contract between the parties specifically provided that Arthur warrants the safety of the bridges and their suitability for the purposes for which they were built.
In November 2007, Arthur discovered that the steelwork structure for a UCB supplied by them to the government of Western Australia and erected in Perth five years ago had become unstable and had partially collapsed. Three people were seriously injured during this incident. The Western Australian Government is making a claim against Arthur for the loss following the partial collapse of the bridges designed and constructed by Arthur and also for the cost of remedial works. The government is also seeking indemnity from Arthur for liability claims being made against them by the three injured persons.
In view of what took place in Western Australia, Arthur had to review the design and construction of their bridges, including the UCB’s which had been erected, or were due to be erected, for the New South Wales government project. The review disclosed serious design errors, in which certain fairly basic miscalculations had been made. Two bridges had already been erected whilst the third one was due to be erected in September 2008. The two bridges that had been erected had to be replaced and redesign works had to be carried out on the remaining bridge.
The New South Wales Australia government is also making a claim against Arthur for all remedial and redesign works to be carried out on the bridges. The costs for the remedial and redesign works amount to over $1.5 million.

Case C

Inadequate Designs & Misleading Statements
Consortium XYZ had a project to design, construct and install an underwater observatory in Brisbane. In its tender documents, ABC Constructions (“ABC”) made certain claims in relation to its previous experience in designing and building such projects and provided estimated costs for the project. ABC was ultimately the successful tenderer and was engaged to carry out the design and construction works for the project.
ABC in turn entered into a consultancy agreement with an engineering firm called MNO. Under the consultancy, MNO was to manage the project including the design requirements and to ensure that the works were suitable, appropriate and adequate for the purposes of the proposed project.
Prior to the commencement of construction, ABC discovered that the marine ground anchors connecting the underwater observatory to the sea bed were inadequate, resulting in extensive design changes and increased construction costs of $2 million.
Consortium XYZ is now claiming the increased construction costs against ABC. It is also suing ABC for, amongst other things, misleading and deceptive conduct on the basis that the eventual costs of the project far exceeded the estimated costs provided by ABC and that ABC’s claim to previous experience in projects of this sort was grossly exaggerated.

Case D

A personal injury claim made against the managing agent of a residential strata complex. A visitor of a tenant allegedly injured herself when she tripped on a crack in the driveway of the property. The building company was joined in the action after thecourt found that the design of property was flawed in that it did not allow for sufficient earth movement.

In the end the case was settled for $200,000 as the injury sustained by the client was less than 7% total body impairment.

The building company’s Professional Indemnity Insurers paid this claim.

Case E

The Plaintiff entered into a contract with a builder to renovate her house. The renovation works included the re-stumping of the house. The builder sub-contracted the re-stumping of the house. The re-stumper requested the Surveyor to provide a building permit in relation to the re-stumping.
The Plaintiff claimed that the re-stumping works were defective and had to be replaced. The Plaintiff sued the builder. The Builder had no insurance covering inadequate design of stump holes. The builder joined the re-stumper and the Surveyor to the proceedings in their defence.
The case settled as the builder ran out of money and went into liquidation. The re-stumper was found to have no insurance and no money. The Surveyor’s PI Insurer contributed $20,000 on the basis that they may not have adequately checked the depth of the stump holes for the re-stumping of the house.

Expert Witness

Managing Director of Australian Indemnity, Paul Ellison, is an experienced expert witness.

Paul Ellison Professional BiographyPicture of me 1


DTFE Certificate of Insurance IV
Senior Associate Australian Insurance Institute
Diploma Financial Services
Certified Insurance Professional

Areas of Expertise

Insurance Broking

  • Political Risk
  • Managed largest non-oil policy in world
  • Financial Institutions
  • Managed Crime Policies for large financial institutions
  • Professional Indemnity

Created and/or managed Insurance Facilities for:

  • Law Society of NSW (Voluntary Scheme)
  • Institute of Chartered Accountants in Australia
  • Medical Defence Union
  • Association of Consulting Engineers
  • National Insurance Brokers Association
  • Association of Consulting Surveyors
  • NSW Bar Association
  • New Zealand Real Estate Institute
  • IBNA Ltd.
  • National Tax Association Australia
  • LJ Hooker Franchise Council

And others, also personally serviced many of Australia’s largest professional firms

  • Directors and Officers Liability
  • Personally serviced the Boards of some of our largest corporations Underwriting/Risk Assessment
  • Managed underwriting authorities on behalf of Lloyds, UK, USA and Australian Insurers over 30 years.
  • Director of the Real Estate Institute of New Zealand Insurance Company
  • Underwriting Manual – wrote PI & D&O Underwriting Manual for use by Australian Insurers

Claim Management

Acted in the successful resolution, of a number of Australia’s largest Professional
Indemnity claims and a number of Directors and Officers claims.
Supervised Claim Systems on various facilities.

Risk Management

Provides practical risk management information by way of papers, seminars and advice


The design, writing and implementation of training programs for staff and Principals.
Presenter of Seminars about Professional Liability and Directors and Officers Liability.

Expert Witness

Acknowledged and experienced expert witness.

Employment History

1976-1986 Australian Manager Bowring (now Marsh) Professional Indemnity Pty Limited Duties:

  • PI Broking
  • Staff Management
  • Coverholder Lloyds and Other Insurance Companies

1986-1998 Managing Director, Willis Professional Services Ltd Director, Willis Australia Ltd Duties:

  • Creation of Professional Indemnity Broking Company
  • Company Management
  • Chairman IT Committee (Broking System Purchase and Implementation)
  • Member E40 Committee (PI Claim Management)
  • Chairman Client Service Improvement Project
  • Coverholder Lloyd and Other Insurance Companies

1998-Present Managing Director, Australian Indemnity Pty Limited Activities:

  • Consulting, Willis
  • Expert Witness, Freehills
  • Consulting IBNA, IBNA Members and clients
  • Consulting various professional firms eg. Grant Thornton
  • Expert Witness Blake Dawson Waldron, NIBA PI Panel
  • Consulting Australian Medical Association
  • Consulting L.J. Hooker Franchise Council
  • Expert witness ,Tottle Partners
  • Expert witness, Kennedys, Niba PI Panel
  • Expert witness, Clayton Utz
  • Joint Venture Lowndes Lambert ,MD Heath Lambert Professional Indemnity Pty.Ltd
    • Creation of Professional Indemnity Broking Company
    • E&O Claim Management
    • Coverholder Lloyds and others
  • Founding Director, IBNA Broking Pty Limited
    • Lloyds Coverholder Limit Group
    • Authorised Representative IBNA Broking Pty. Ltd.
  • Underwriting Manager Professional and Financial Risks SRS Underwriting Agency
    • Lloyds Coverholder Limit Group (DAC)
    • Lloyds Coverholder Markel Syndicate.
    • Coverholder WRBerkley London Ltd.
  • Authorised Representative Eagle Insurance Brokers Pty. Ltd.
  • Joint Venture Queensland Master Builders Association
    • Authorised Representative Queensland Master Builders Insurance Services
  • Transactional Insurance
    • direct and wholesale placement of many Insurance policies