Insurance availability plagues engineers

Ferm Engineering has stopped conducting performance engineering for buildings with flammable aluminium composite panel cladding and properties in bushfire zones because the work is considered high risk by professional indemnity (PI) insurers.

CEO Stephen Burton says Ferm has completed cladding performance engineering designs for a hotel complex in Brisbane and a major Gold Coast building, but they were the last two Ferm will work on unless a solution can be developed for fire engineers’ PI insurance costs.

“Our performance engineering solutions have saved the owners of these buildings about $1 million each, but we will no longer offer that service because it pushes our PI premiums into an out-of-reach level.” He says finding affordable cover is almost impossible. “We’ve reduced some risk-based work to enable Ferm to get PI insurance but it’s still expensive.

“We have to pay 600% more than in past years and cover must be available for seven years, so clients are not covering these costs,” Stephen says.

“It’s an unfair playing field because fire engineers are disadvantaged, compared with other engineers and other fire specialists, all of whom pay lower PI premiums than fire engineers.”

Stephen says PI insurance is mandatory in all states and territories. However, a loophole for Qld Building & Construction Commission-registered fire protection contractors enables them to trade without PI insurance, providing clients are notified that no cover is in place.

“This is inequitable for engineers that must have large PI limits but are competing against underinsured or uninsured contractors that can quote lower on projects.”

Stephen and other engineering firms have provided background information to the professional body Engineers Australia (EA), to encourage it to speak on their behalf to the Qld Government and insurers.

EA Project Manager, Building Reform and Projects, Adam Lee says EA is “well aware of the struggle” many engineering practitioners, particularly fire and geotechnical engineers, face in obtaining PI insurance.

EA has hosted roundtables with the Insurance Council of Australia to discuss the issues and surveyed its members to understand the depth of the problem and compile hard data. Adam says some high-profile claims, for example London’s 2017 fatal Grenfell Tower fire, are partly to blame for insurers’ caution.

He says EA is developing documents for engineers to assist them to get the best outcomes from their insurance brokers.