Lawyer says HIH failure will savage builders: [1 Edition]
Stapleton, John. The Australian; Canberra, A.C.T. [Canberra, A.C.T] 22 June 2001: 41.
Abstract
A PROMINENT building lawyer has lashed out at insurers forcing builders to put their personal assets on the line in the wake of the HIH collapse.
Building solicitor Kim Lovegrove said “diabolically onerous conditions” were being placed on builders seeking replacement residential indemnity coverage.
Mr Lovegrove, principal of Sydney-Melbourne law firm Lovegrove Solicitors, said the plight of home builders, as they desperately scrimmaged around for replacement residential indemnity cover, was another tragedy from the HIH collapse.
Full Text
A PROMINENT building lawyer has lashed out at insurers forcing builders to put their personal assets on the line in the wake of the HIH collapse.
Building solicitor Kim Lovegrove said “diabolically onerous conditions” were being placed on builders seeking replacement residential indemnity coverage.
Mr Lovegrove, principal of Sydney-Melbourne law firm Lovegrove Solicitors, said the plight of home builders, as they desperately scrimmaged around for replacement residential indemnity cover, was another tragedy from the HIH collapse.
“The typical profile is a small law-abiding builder, who paid for the cover prior to the insolvency,” he said.
“Our hapless stereotype now finds himself in no-man’s land because he can’t build without replacement cover.
“Many of these poor buggers are told by some insurers that unless they provide personal guarantees they won’t get cover. I read one such guarantee the other day and it could only be described as diabolically onerous.”
Mr Lovegrove said that if an owner made a claim on the policy, regardless of merit, the builder had to indemnify the insurer against any payout or expenses incurred by the insurer.
Mr Lovegrove said it would be tantamount to negligence to advise a builder to sign such documents.
“It is like placing one’s neck into a hangman’s noose … and the most sinister spin is that the builder doesn’t know when the hangman cometh.”
Even more disturbing, builders were being asked to secure all assets, including those in joint names such as family homes, and spouses were likewise being asked to provide personal guarantees.
“Some of these draconian guarantees or back-to-back indemnities state that one should seek legal advice before signing up,” Mr Lovegrove said.
“The problem for the lawyer is that this type of document is an anathema. All the lawyer can say is you’re dammed if you do and dammed if you don’t.
“Either put everything on the line, which I can’t advise you to do, but understand that if you don’t do that you don’t get cover, which means you can’t build.”
Mr Lovegrove said the law requiring builders to pay for homeowners’ insurance cover added insult to injury.
“A lot of builders don’t quite understand this,” he said. “They think they are the ones who are insured, when in actual fact they’re not.
“Compare this with lawyers, doctors and accountants, or even other building practitioners such as engineers or building surveyors.
“They pay for their cover and are indemnified for claims and legal fees associated with defending those claims.”