BIA accused of breaking law over insurance rules

The Building Industry Authority yesterday faced fresh claims that it had broken the law, as it was revealed the Government will appeal against a High Court finding that leaky building owners have the right to sue it.

National MP Nick Smith said the former Government agency left thousands of home-owners in the lurch by "failing to meet their legal requirement that all independent [building] certifiers had insurance for the full 10-year period of viability".

Instead of following this Building Act requirement, the BIA had enabled certifiers to roll over insurance on a yearly basis, he claimed.

This enabled insurance companies to desert the certifiers - many of whom then went out of business - almost as soon as the leaky home crisis broke, leaving home-owners with no real recourse.

Dr Smith said it was a "massive scandal" made worse by the Government's decision to spend $6 million of taxpayers' money in the courts fighting innocent home owners.

The February High Court finding followed a BIA attempt to have three claims of negligence filed against it by the Sacramento housing complex in Botany Downs struck out.

Sacramento lawyer Paul Grimshaw yesterday confirmed the Government had filed an appeal against the High Court finding, which involves a $19 million claim against the BIA and others.

The claim alleges the agency was in charge of regulating the building industry and knew about the crisis in 1998, yet failed to act.

Mr Grimshaw said yesterday the issues raised by Dr Smith were another key aspect along with the fact the insurance cover that independent certifiers did have was inadequate.

It was disappointing the Crown was determined to stretch out the process, he said.

Dr Smith highlighted the case of Whangarei couple Tony and Lara Cox, who spent $190,000 on their home, have a mortgage of $60,000, but who will have to find at least $160,000 for repairs.

They have been advised to demolish their house but have been unable to seek compensation because both the builder and certifier have gone broke. When they tried to track down the certifier's insurer, the BIA would not release the information, saying it was "commercially sensitive".

It is believed the certifier was one of many who may not have had insurance, which Dr Smith implied the BIA did not want to admit to protect its own potential liability.

A Ministry of Building and Housing spokeswoman said the insurance scheme approved by the BIA in 1994 required building certifiers to have insurance cover based on annual claims made on policies.

"The BIA considered another option to require certifiers to have 10 years forward insurance cover but such cover was not available in the market at the time."

Building Issues Minister Chris Carter appeared less confident yesterday. Although his legal advice said the Government bore no legal liability for the leaky building saga and should not therefore put taxpayers' money at risk, he did not yet know whether the BIA had broken the law in regard to insurance.

The story so far

Thousands of homes built in the 1990s are now leaking and rotting because of faulty building materials and work practices.

A report by a developers' group last month estimated that 12,000 parties were involved in cases before the Government's Watertight Homes Resolution Service.

The New Zealand Property Group report estimated the same number of cases could be before the courts.