INSURANCE LIMITS BEECHWOOD VICTIMS

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Insurance limit hurts Beechwood victims

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* Kelly Burke Consumer Affairs Reporter
* May 16, 2008
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THE collapsed building company Beechwood Homes has been pronounced insolvent by its insurer, paving the way for insurance claims by consumers trapped in mid-construction.

But the victims of the collapse are not covered for anywhere near $300,000 each, as the NSW Government suggested yesterday under the state's home warranty insurance scheme. And almost 10,000 existing home owners, in addition to the 700 who are in the process of building, could get burnt if structural defects develop in homes built over the past six years.

The Premier, Morris Iemma, urged customers to stay calm yesterday, telling radio 2UE that "most people will have their home warranty insurance, and that's around $300,000, so if you require assistance or information, then contact us".

NOTE: HOME WARRANTY INSURANCE IS BECOMING A NEED IN MOST COMMUNITIES.

The Minister for Fair Trading, Linda Burney, repeated Mr Iemma's assurances during a number of talkback interviews, and at a news conference on Wednesday.

However, according to the fine print of the Government's "last resort" insurance scheme, claims for incomplete work are limited to 20 per cent of the contract price, with the maximum payable capped at $300,000. To claim such an amount the incomplete home would have to be a $1.5 million mansion.

The Beechwood kit homes being built in Sydney cost between $90,700 and $195,220, with the option of spending about $50,000 more in extras. The average amount a Beechwood customer could hope to claw back through the home warranty scheme would be about $31,000, even if they are nearing completion and have already forked out for most of the progress payments.

Ms Burney urged people affected to seek advice from the insurer about lodging a notification of claim for deposits or incomplete or defective work. This would also apply to any owner of a Beechwood home built over the past six years seeking rectification for any structural faults found in their house.

According to the website of Beechwood Homes, the company builds 1500 homes on average each year, meaning about 9000 homes could be affected by the collapse, along with the 300 homes now under construction and a further 400 customers who have paid deposits.

The receiver Deloitte said the insurance might not be necessary, given that expressions of interest to buy the company had been received from eight parties.

NOTE: HOME WARRANTY INSURANCE COVERS MAJOR CONDITIONS WHICH DOES NOT CONFORM WITH THE CLIENTS.

The home warranty insurance scheme has come under criticism from many sectors, including the Productivity Commission, the consumer group Choice and the Building Action Review Group. All have argued that the scheme appears to offer little protection to either consumers or small to medium builders.

Phil Dwyer, the national president of the Builders Collective of Australia, which was formed to protect builders and consumers after the collapse of HIH in 2001, said the scheme was nothing more than a cash cow for insurers.

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