Insurance Checklist

by Leslie Buchbinder
Builders’ Choice Magazine, December 2014

Builders and building subcontractors are exposed to many risks which, if not properly managed, can lead to financial ruin.

Builders and building subcontractors are exposed to many risks which, if not properly managed, can lead to financial ruin. These include risks under the terms of building contracts or subcontract agreements, as well as exposure under various pieces of legislation such as under the Workers Compensation and Injury Management Act 1981 and the Occupational Safety and Health Act 1984. There is also potential exposure under general laws such as negligence and breach of contract.

One useful management tool to have in place is appropriate and adequate insurance cover. However, not every risk can be insured against; insured against adequately, or insured against for a price that is acceptable to the builder or building contractor.

It is important that the builder or building contractor clearly understands the extent of the insurance contract before the contractual terms are finalised in order to avoid circumstances where the wrong assumptions have been made as to what risk is covered by the insurance policy and which party must accept responsibility for that risk. In a climate where insurance premiums are increasing, and more and more exclusion clauses are being inserted into building contracts and insurance policies, this is even more so the case.

Insurance checklist

When deciding how best to deal with a particular risk, you may find it useful to consider the following:

  1. Is the risk concerned insurable? Can a policy of insurance be procured which will specifically cover this risk?

  2. Is the insurance cover adequate? If a policy is obtained will it respond to the risk that has been identified and will it do so to the fullest extent of that risk?

  3. Does the cost of obtaining the insurance outweigh the risk?

  4. What is the nature of the policy and for how long will that policy provide cover?

  5. Can the policy wording be amended to specifically provide for the risk at hand or is it to be generic in nature only?

  6. Is the insurer likely to remain in business for the duration of the construction project?

Insurance disputes

Having the appropriate insurance cover does not necessarily avoid disputes arising. Issues can arise in relation to the insurance cover itself and whether or not a builder or a building contractor is protected by that insurance cover in any given circumstance.

What happens if you need to submit a claim to an insurance company? In the case of smaller and more straightforward matters, the claim may be adequately submitted by the builder or building contractor directly.

However, for larger and more complex claims, or where issues arise as to whether or not the insurer will extend indemnity to the builder or building contractor, legal advice can make a significant difference as to whether or not the claim will be ultimately accepted. Sometimes the wording of the claim submitted becomes extremely important.

Claims may be declined by an insurer for a variety of reasons. For example, in the case of a claim for storm damage, an insurer may attempt to decline the claim on the basis that gutters were blocked by roof debris and argue that this is evidence that the building was poorly kept and not properly maintained as required under the terms of the policy of insurance.

Building claims are often denied by insurers because of issues associated with defects.They may be inherent defects or defects which develop in a building over the years and fail to be considered separately from any compulsory insurance requirements.

Being declined by an insurer is not the end of the road

That decision may be the subject of internal dispute resolution pursuant to the insurer’s nominated procedures and from there the matter can be escalated further and ultimately, if necessary, to litigation. However, prior to reaching the stage of litigation there are often opportunities to seek to resolve the dispute quickly and less expensively.

Insurance is a key element of risk management – but policies must be properly considered, drafted and managed. Once any level of complexity is involved, taking legal advice is highly advisable, both in structuring insurance policies and when making claims. BC

PLEASE CONTACT

Bowen Buchbinder Vilensky Lawyers: (08) 9325 9644 or bbvlegal.com.au

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Contested Wills

– The West Australian

Contested wills are among the most rapidly growing form of litigation in Western Australia.  Booming property values over the past ten years, along with enforced superannuation contributions, means that many older people are leaving behind life-changing amounts of money.  And the rise of divorce, de facto relationships and blended families makes for many more potential claimants than in the past. 

In my experience, as soon as the value of an estate exceeds $500,000, the likelihood of someone challenging a Will becomes very much higher, although I also see challenges to estates that are more modest.  And with the average family home in Perth worth over $500,000, many estates present high value targets.

The law provides that, so long as you are mentally competent, you may leave your assets to whoever you chose.  But this seemingly unfettered discretion is tempered by what the Courts have described as a “moral responsibility” to make provision for certain family members.  

The Family Provision Act, formerly known as the Inheritance Act, opens your will to challenge if you do not make “adequate provision” for the “proper maintenance, support, education or advancement in life” of certain family members. These family members include spouses – current, former and de-facto  – children, step-children, grandchildren and parents, to name the main groups.

 

The Supreme Court can, and often does, over-ride the wishes expressed in a will that fails to make adequate provision for these family members.  By allowing a successful challenge, the court can effectively rewrite your will after your death.

How do you avoid such a challenge?

Obviously every individual is different, and specific legal advice on your own situation should be taken.  The greatest complexity is that adequate and proper provision is different not just for every family, but for different members of the same family and at different times in their lives:  what is adequate and proper for the a young child of a multi-millionaire is different to that for an adult child with their own means with a more modest upbringing. But by way of a few general guidelines:

·        Make sure you leave adequate and proper provision for family members who could prove that they are even partially dependent on you materially.  For example, even though you may have a very difficult relationship with a step-son, if he lives rent-free in your granny flat and you don’t make provision for him in your Will, he may have a good case for making a successful challenge after you die.

·        Be a ‘wise and just testator’ as opposed to a ‘fond and foolish’ one.  Leaving $50,000 for the continued care of your beloved cat while making no provision for your defacto’s irksome daughter, who still lives at home, is an example of a Will that is open to challenge.

·        Explain your decisions in your Will or in another document clearly.  Such explanations can strengthen it against challenge.

·        Update your Will every three years.  Life moves on, relationships change, and what was once a sound plan of action may be overtaken by events. 

·        Be as open as possible with your children and beneficiaries about your plans for your estate and how much wealth you have.

This last point – conversations about inheritance – is worth emphasising.  Many parents avoid it, not wishing their kids to feel entitled, uncertain about their own intentions, feeling uncomfortable talking about their own death, or for various other reasons.  Children, similarly, may feel awkward, not wanting to appear greedy, believing ‘it’s Mum and Dad’s money after all,’ and so on.  A recent study by UBS Bank Investor Watch in USA revealed that only 54% of people had discussed estate plans with their children, and only 34% told their heirs how much money they had.

From a legal perspective, the fewer unresolved issues there are, the less likely a legal challenge.  Discussion not only clears the air, but by identifying potential problems down the line, a parent can make a plan that’s legally more robust.  All of which enables the smooth transfer of assets in accordance with your wishes.

As always, sound legal advice at the outset is the best possible step you can take.  A properly drafted Will can prevent disputes, whereas a poorly drafted or inadequately thought out Will is fertile ground for protracted, expensive and acrimonious litigation.  Legal advice, and open conversations with your family, are the key.

PLEASE CONTACT

Bowen Buchbinder Vilensky Lawyers: (08) 9325 9644 or bbvlegal.com.au

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5 Things Everyone in the Building Industry Should Know about the Property Securities Register

– Builder’s Choice Magazine

 The Personal Property Securities Register (PPSR) is a national online database  which electronically manages and stores information regarding security interests over any personal property apart from real estate. On the register, anentity granting a security interest is the ‘grantor’, the entity getting the security interest is the ‘secured party’ and secured personal property is known as ‘collateral’.

5 Things Everyone in the Building Industry Should Know about the Personal Property Securities Register

By:Craig Hollett (Director, Bowen Buchbinder Vilensky) and Darryl Koh (Solicitor, Bowen Buchbinder Vilensky)

Introduction

The Personal Property Securities Register (PPSR) is a national online database  which electronically manages and stores information regarding security interests over any personal property apart from real estate. On the register, anentity granting a security interest is the ‘grantor’, the entity getting the security interest is the ‘secured party’ and secured personal property is known as ‘collateral’.

1. What is a security interest?

This is an interest in personal property provided for by an arrangement which secures payment or performance of an obligation. Alwaysconsider if a security interest should be registered on the PPSR. It may not be worthwhile if the personal property is below a certain value, or cannot be easily identified, for example, if it does not contain a serial number.

2.What are typical registrable security interests?

These can arise from a variety of arrangements: contained in commercial agreements such as in building or construction contracts e.g.:

(a) a principal  entitled to take possession of a contractor’s equipment to complete any outstanding work and sell the equipment to recover any amounts owing to the principal by the contractor;

(b) the supply of equipment whereby title is retained until the equipment is paid up. This is called a ‘purchase money security interest’ (or PMSI);

(c) where there is a ‘PPS lease’ (also a form of PMSI) of equipment –  an arrangement whereby you have possession of certain equipment for a defined period of time but do not actually own the equipment, e.g. a contractor leasing equipment from a supplier.  For a PPS lease, the lease period must be more than one year or indefinite. If the equipment is an aircraft, motor vehicle or a watercraft, the time period is 90 days.

3. Why is it important to register security interests?

The consequences of not protecting one’s security interests can be dire. For instance, if you lease equipment to a contractor but fail to register your security interest, and the contractor grants its bank an interest over all its assets and later becomes insolvent, then the bank may be entitled to claim those assets without having to consider your interests over those assets.Where there are two or more security interests registered over the same collateral, priority is determined by the timing of the registration, subject to the special priorities for PMSIs.

4. The special priorities for PMSIs

If registered in time, a PMSI has super-priority and leapfrogs ahead of any other existing registrations on the same collateral e.g. if a contractor has already granted a security interest to a bank over all of its existing and future assets, the lessor will still maintain priority over those assets that are being leased out to the contractor even though the lessor may have registered its security interests at a later time than the bank.

5. By when must a security interest be registered?

Generally, where the grantor is a company, the security interest has to be registered within 20 business days after the agreement giving rise to the security interest came into force.

The table below summarises when PMSIs should be registered otherwise a secured party will not benefit from the PMSI super-priority(although the default priority rules will still apply).The term ‘inventory’ refers to personal property used in the ordinary course of business eg. stock stored for the purposes of future sale or supply. ‘Goods’ refers to any tangible personal property.

Type of collateral

​When PMSI must be registered

Collateral is inventory

​If goods – before the grantor obtains possession of the goods 

If not goods – before the security interest attaches to the inventory 

​Collateral is personal property, other than inventory

​If goods – within 15 business days after the grantor obtains possession of the goods 

If not goods – within 15 business days after the security interest attaches to the personal property 

 Conclusion

When buying equipment, it is prudent to first do a PPSR search to check if there are any secured interests over it. When leasing out equipment to someone else, protect your interests in that equipment by way of PPSR registration bearing in mind the time limits for registration.

As always, if you are in doubt with regards to any aspects of the PPSRor the protection of your interests, you should seek competent legal advice as soon as possible.

PLEASE CONTACT

Bowen Buchbinder Vilensky Lawyers: (08) 9325 9644 or bbvlegal.com.au

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