‘Double catastrophe’: builder collapse pain compounded
Claims on taxpayer-funded home insurance have been hobbled by poor communication and a lack of transparency, with some suffering a “double whammy”.
In a report tabled in the Victorian parliament on Wednesday, the state ombudsman revealed delays in the Victorian Managed Insurance Authority’s handling of claims following the collapse of several major construction companies.
If a builder is unable to complete construction due to bankruptcy, the government authority handles local building insurance claims.
Nearly 1700 properties across Victoria and Queensland were left in limbo when Porter Davis went into liquidation in March 2023.
While the taxpayer-funded scheme achieved a reasonable outcome for most homeowners, Ombudsman Marlo Baragwanath found there were problems with their processes, particularly complex claims.
“One homeowner described their experience as a ‘double whammy’ – first the builder’s collapse, then their experience with the authority,” Ms Baragwanath said. he said.
“Home ownership is an aspiration of many Victorians, so it is critical that fair systems and processes are in place to enable people to achieve this ambition.”
Most Porter Davis homeowners did not face unreasonable delays in their claims, but those who did endure serious personal and financial hardship.
The Ombudsman said the authority must exercise discretion within the limits of its policies to achieve fair and timely outcomes for landlords.
The civil service watchdog also said the agency’s dispute-handling processes and practices met obligations but were not always fair and reasonable.
The report included nine recommendations focused on improving processes for domestic building insurance management, strengthening communication with homeowners and increasing overall transparency.
Victoria’s new Building and Plumbing Commission and the Department of Transport and Planning have accepted the recommendations in principle.
The Ombudsman received more than 120 applications, 260 complaints and 46 requests.
About 560 Porter Davis customers were not covered by the program despite paying the construction giant before the collapse, forcing the state government to create a separate $15 million bailout.
Under Victorian legislation that comes into force in 2024, builders who fail to obtain home building insurance will face fines of up to $96,000 for individuals and $480,000 for companies.
