The recent case of considered the meaning of 鈥榩rofessional services鈥 within a design and construct policy.
Facts of the case
FKP Commercial Developments Pty Limited was the developer of a building project under a contract with FKP Constructions Pty Limited, a head contractor. FKP Constructions used third party consultants and sub-contractors, choosing not to perform any design or construction works itself.
The registered proprietors of the common property and commercial buildings alleged:
- numerous defects and non-complying construction work; and
- losses arising from breaches of the statutory warranties under the Home Building Act 1989 and/or a common law or statutory duty of care.
The FKP parties sought an indemnity for the claim under their 鈥楧esign and Construction Professional Indemnity鈥 insurance policy. Insurers rejected the claim on the basis that the potential liability did not arise from the provision of 鈥榩rofessional services鈥 as defined under the policy.
Judgment
On the question of whether the claim was a 鈥榗laim for civil liability鈥 based on the insured鈥檚 provision of professional services鈥, the court held the claim fell outside the scope of the policy. The court held that FKP鈥檚 liability arose from its position as the owner/developer of the property, and not from the provision of professional services.
The court characterised the liability of the FKP parties as wholly based on or arising from the following, which were not covered under the policy:
- Construction, manufacture, assembly, installation, erection, maintenance or physical alteration of buildings, goods, products or property (which are excluded from the definition of 鈥楶rofessional Services鈥); or
- Defects in or lack of suitability of products and goods used in the construction of the common property of the residential building鈥 (which are excluded under the policy).
Considerations for underwriters
This case serves as a reminder that, in the words of the judge in the case, 鈥榓 party gets the policy they pay for鈥.
Contents
- The Word, November 2022
- An update on articles in previous editions of the Word
- ‘Final judgment’ or ‘final adjudication’ - what’s the difference?
- Atlanta adopts Plain Numbers to improve policy readability
- Duty to defend - when is it triggered?
- Date of incident or date of coverage decision – when does the cause of action commence?