Home Owners Warranty (“HOW”) Insurance is perhaps the least understood insurance product in Australia.

Introduced in New South Wales in 1997, it replaced a government run insurance scheme with a privately operated insurance regime for builders undertaking residential building work in New South Wales.

HOW Insurance is a statutory scheme of insurance which indemnified beneficiaries for loss and damage caused by a builder or developer breaching the statutory warranties contained in Part 2C of the Home Building Act, 1989. In other words, it can provide compensation to beneficiaries (including Strata Schemes and Community Associations) for the cost of rectifying defective work done by a builder.

Since 1997, there have been numerous changes to HOW Insurance with the result that there are now over 5 different schemes of HOW Insurance in operation.

HOW Insurance operates differently from normal insurance products such as car, home and contents insurance. A builder will obtain HOW Insurance for the benefit of a developer or home owner. Strata Schemes and Community Associations do not purchase HOW Insurance, they receive the benefit of HOW Insurance because they are considered to be a successor in title.

HOW Insurance has become an increasingly complex insurance product. Significant changes have been made to the Home Building Act, 1989 and the regulations which have altered the way HOW Insurance operates considerably. Various decisions of the NSW Court of Appeal, the Supreme Court and District Court of NSW have materially affected the extent of the indemnity provided by HOW Insurance.

Unlike other insurance products, beneficiaries of HOW Insurance have a mechanism to “appeal” the determination of the insurer with respect to their claim to the specialist Tribunal or a Court (depending on the amount of the claim). The decision to appeal a determination of an insurer should only be made after obtaining legal advice as the evidence required in the Tribunal or Court to establish a valid claim is far more onerous than what may have been submitted in support of the HOW Insurance claim in the first place.

The Building and Construction Division has extensive experience in submitting and conducting HOW Insurance Claims. Grace Lawyers undertakes:

• notification, preparation and management of Claims under the “First Resort” scheme of HOW Insurance (for policies issued before 1 July 2002);
• notification, preparation and management of Claims under the “Last Resort” scheme of HOW Insurance (for polices issued after 1 July 2002); and
• appeals and internal reviews of HOW Insurance determinations.

We liaise daily with HOW insurers and their insurance assessors in respect of claims. We understand not only the law and procedure concerning HOW Insurance, but also the procedures adopted by each insurer in respect of their handling of claims. Our aim is to ensure that the presentation of your claim will result in a favourable and acceptable outcome in the circumstances so as to avoid litigation with the Insurer.

Grace Lawyers can provide your Strata Scheme or Community Association with expert advice in relation to HOW Claims.