Explanatory note
This explanatory note relates to this Bill as introduced into Parliament.

Overview of Bill

The object of this Bill is to make the following amendments to the Home Building
Act 1989 and the Home Building Regulation 2004:

(a) the Act is amended to provide that a home warranty insurance policy only
covers a loss that becomes apparent and is notified to the insurer within the
period of insurance (or is notified within 6 months after the loss becomes
apparent in the case of a loss that becomes apparent in the last 6 months of the
period of insurance),

(b) the Act is amended to clarify the operation of provisions that enable a claim to
be made under a home warranty insurance policy when a contractor’s licence
is suspended for failure to comply with a court or Tribunal order to pay money
on a building claim,

(c) the Act is amended to make it clear that when home warranty insurance
policies are expressed to provide the minimum cover required under the Act,
the amount of cover provided is the minimum applicable when the policy is
issued,

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Home Building Amendment (Insurance) Bill 2009
Explanatory note

(d) the Act is amended to enact consequential savings and transitional provisions,
including provisions that extend the amendments referred to in paragraphs (a)
and (c) to insurance policies issued before the commencement of those
amendments,

(e) the Regulation is amended to extend the grounds for refusing to issue, renew
or restore an authority under the Act to include failure to satisfy certain
judgments and orders relating to building claims or claims by insurers in
relation to home warranty insurance,

(f) the Regulation is amended to permit home warranty insurance policies to
include a provision allowing the insurer to reduce its liability for any failure
by the insured to enforce a statutory warranty, to the extent that the failure has
prejudiced the insurer,

(g) the Regulation is amended to repeal provisions that will be redundant as a
result of the proposed amendments to the Act,

(h) minor or consequential amendments.

Outline of provisions

Clause 1 sets out the name (also called the short title) of the proposed Act.

Clause 2 provides for the commencement of the proposed Act on the date of assent
to the proposed Act.

Schedule 1 Amendment of Home Building Act 1989
No 147
Schedule 1 [1] makes it clear that a recent extension of the home warranty insurance
policy (enabling a claim to be made when a contractor fails to pay money required to
be paid by a building claim order) operates on the same basis as if the contractor had
become insolvent, which is an existing ground of liability under such a policy.

Schedule 1 [6] makes a consequential amendment.

Schedule 1 [2] provides that when a home warranty insurance policy provides that
the amount of cover is the minimum amount required under the Act it means that the
amount of cover is that minimum amount as at the time the policy is issued. A
transitional provision (Schedule 1 [7]) extends this amendment to existing policies.

Schedule 1 [3] limits the claims covered by a home warranty insurance policy to
make it clear that such a policy only covers a loss that becomes apparent and is
notified to the insurer within the period of insurance or (if the loss becomes apparent
during the last 6 months of the period of insurance and does not arise from
non-completion of work) is notified within 6 months after becoming apparent. A
transitional provision (Schedule 1 [7]) extends this amendment to existing policies.

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Home Building Amendment (Insurance) Bill 2009
Explanatory note
Schedule 1 [4] clarifies an existing regulation-making power that authorises
limitations on liability under a home warranty insurance policy to include reductions
in liability.

Schedule 1 [5] inserts a savings and transitional regulation-making power.

Schedule 1 [7] inserts savings and transitional provisions consequent on the other
amendments that the Bill makes to the Act and the Regulation.

Schedule 2 Amendment of Home Building
Regulation 2004
Schedule 2 [1]–[4] extend provisions of the Regulation that provided the grounds on
which the issue, renewal or restoration of a licence and other authority under the Act
must be refused to include the following grounds:

(a) being a debtor under an unsatisfied judgment for payment of money in relation
to a building claim or to an insurer in relation to a home warranty insurance
claim,

(b) being a director in the last 3 years of a corporation that is a debtor as referred
to in paragraph (a),

(c) being subject to an unsatisfied order of a court on a building claim.

Schedule 2 [5] permits a home warranty insurance policy to include a provision
allowing the insurer to reduce its liability because of a failure by the beneficiary to
take action to enforce a statutory warranty from the breach of which the insured loss
arises, but only to the extent of an amount that fairly represents the extent to which
the insurer’s interests were prejudiced as a result of the failure. A transitional
provision (Schedule 1 [7]) extends this amendment to existing policies.

Schedule 2 [6] omits a provision that will be redundant. The provision was an interim
measure introduced in December 2008 to limit the making of a claim under a home
warranty insurance policy in essentially the same way as the amendment to be made
by Schedule 1 [3]. A transitional provision (Schedule 1 [7]) provides a period of
grace for the notification of a loss in a case in which the redundant provision
prevented a claim from being made.

Schedule 2 [7] omits a provision that will be redundant as a result of the amendment
to be made by Schedule 1 [1].

Note: If this Bill is not modified, these Explanatory Notes would reflect the Bill as passed in the House. If the Bill has been amended by Committee, these Explanatory Notes may not necessarily reflect the Bill as passed.

 

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