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17/11/2021 – Technical compliance certificates

The last two years have seen a great increase in requests for specialist consultants to sign reports conforming that a specific design solution complies with the National Construction Code, especially where the design relies on a performance solution. Whether called a “certificate”, “report” or merely a “letter”, these documents impose liability and risk on the consultants who sign them.

But at the same time, if they work as intended, they should also reduce overall risk by identifying and remedying non-compliant designs as well as by providing a mechanism for better collaboration between consultants. By way of example, one of the many factors behind apartment building fires has been fire engineers advising only on early, incomplete designs which did not yet specify the exact cladding system that would be used.

Why the increase?

Since the Lacrosse Building fire in late 2014, the construction industry has come under scrutiny in various investigations, and many of these have identified non-compliant building products as a major contributor to building defects.

Arising out of that, the National Construction Code has been amended to include a new Part A2.2(4), which commenced operation on 1 July 2021. This Part requires that, when a performance solution is relied upon, a documentation trail must be created, including a design brief, analysis and evaluation of the solution, and a final report confirming compliance. If embraced by the industry, this procedure can lead to reduced risk and more compliant buildings. However, if it is not followed properly, the documentation trail, or the absence of one, could leave consultants more vulnerable to legal claims.

Risk management by building surveyors and certifiers is probably another factor driving these certificates. They have suffered unsustainably large claims over the last few years, in proportion to the comparatively small size of their profession, and consequently have faced escalating difficulty in obtaining insurance. Technical compliance certificates are perhaps seen by building surveyors and certifiers are a system that can reduce these large claims, and thereby help to reverse this trend.

Whose job is it?

Part A2.2(4) does not allocate responsibility for this documentation trail to any specific professional. We would speculate that responsibility lies with every consultant whose advice is relevant to that performance solution. For example, for fire compliance of external walls, the fire engineer, the building surveyor/certifier, and the architect as a minimum are likely to have some responsibility.

Am I insured for them?

These are some areas of potential uninsured liability to look out for (though obviously this general article can’t confirm your specific insurance cover, and you should check your own policy to find out how these issues apply to you):

  1. Specific products – professional indemnity insurance commonly excludes cover for claims arising out of asbestos, nuclear/radioactivity, and non-compliant aluminium composite panels with a polyethylene core. Some policies go further and exclude other products. Liability under certificates would not be insured to the extent the certificate pertains to an excluded product.
  2. Dishonesty – professional indemnity insurance covers negligence, but usually excludes claims arising out of dishonesty. A consultant is generally not insured for claims arising out of giving a certificate if the consultant knew the certificate was false (and it can be helpful to explain this to clients or others if under pressure to sign a dubious certificate).
  3. Work outside insured profession – generally, professional indemnity insurance covers claims arising out of the specific profession(s) noted on the policy schedule, and would not cover performance by the insured of services outside that profession(s).
  4. “Assumed liability” language – professional indemnity insurance usually excludes cover for liability under contract clauses that impose a higher standard of liability or performance than a consultant’s equivalent common law duty. Examples of uninsured liabilities include clauses that require the consultant to “warrant”, “guarantee”, “indemnify”, achieve a “fit for purpose” outcome, perform to the “highest” standard, or “ensure” outcomes.

How should I manage them?

Providing technical compliance certificates does create risks. If the content of the certificate is incorrect, then other parties who relied on the certificate, and suffered loss as a result, may be able to claim compensation from one or all of the providers of the certificate, based on misleading and deceptive conduct, negligence, or similar.

This makes it important to check these certificates carefully, asking:

  1. Is the subject matter of the certificate within the expertise of a member of the profession(s) noted on my professional indemnity insurance?
  2. Are all the statements and the conclusions in the certificate correct?
  3. Does the certificate contain any “assumed liability” language that should be deleted or amended?
  4. If my assessment of the certificate is reliant on information or specialist technical expertise provided by others (e.g. certification provided by product manufacture, or advice of fire engineer for specific fire compliance matters), does the certificate say so?

The certificate may require amendment to address these issues and make it an accurate certificate which the consultant can honestly sign. Unfortunately, the informed by Planned Cover contract review service cannot review these certificates, as the vast majority of their content is technical detail that is outside our risk managers’ expertise. However, our Practice Guide – Inspections and Certificates (available to download from our website with a Planned Cover client login) outlines some common risks in certificates and suggestions for improving them.

As these certificates become more common, it is important to predict (as best you can) which design solutions will require them, to price the work of preparing and providing them, and to include it in your fee. You might think this has heightened importance on novated or design-and-construct projects, where excessive substitutions by the head contractor and trades could require preparation of multiple and amended certificates. Either this work has to be paid for, or the head contractor needs to moderate its use of substitutions.

If a project is likely to require multiple performance solutions, and multiple technical compliance certificates, consider incorporating this into the overall project procedures, as part of design coordination and clash detection. Encouraging better collaboration between consultants is a positive attribute of these certificates, and embracing this aspect could lead to better design and lower risk overall.

Wendy Poulton
Risk Manager
informed by Planned Cover

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