Incorrect Capping of Plumbers' Professional Indemnity Insurance

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21 Jul, 2025 1177 1

Have Insurers Been Incorrectly Capped Plumbers' Professional Indemnity Insurance Polices?

In October 2024, a review into the Victorian Building Authority was conducted by Weir Legal. This Review, among other related enquiries, have highlighted concerns regarding the improper refusal and/or capping of insurance claims for licensed plumbers in Victoria.

It has been a common practice for insurers to cap plumbing insurance claims at $50,000 which appears to deviate from the insurance requirements outlined in the Ministerial Order: Licensed Plumbers General Insurance Order (2002) (‘Ministerial Order’). These events have raised questions about compliance and fairness in the industry.

Understanding the Ministerial Order

The Ministerial Order mandates that licensed plumbers must hold specific insurance policies to cover liabilities arising from their work. These include:

Rectification Works for Defects: Minimum coverage of $50,000 for each compliance certificate;
Trade Practices Liability: Minimum coverage of $50,000 for each compliance certificate;
Consequential Financial Loss: Costs ‘reasonably and necessarily incurred’;
Non-Completion of Works: covered under specified circumstances (Clause 11(b));
Public Liability: Minimum coverage of $5 million for any one occurrence;
Completed Work Liability: Minimum coverage of $5 million for any one occurrence; and
Legal Costs: Reasonable expenses associated with the successful enforcement of claims.

While the Ministerial Order permits insurers to impose caps on the total payout under a policy (Schedule 3), these caps must align with the mandated coverage levels particularised above. In other words, the specified $50,000 is the minimum requirement, with no cap being imposed unless the specific insurer’s policy explicitly provides for this.

The Need for Review?

The Ministerial Order has been in place since June 2002 and has not been updated, nor have the minimum amounts been adjusted for indexing. In comparison to 23 years ago when the ministerial order was enacted, many officials argue that $50,000 is not nearly enough to cover some of the more significant defects identified today.

Despite these issues being raised with the relevant Government entities, no changes or updates have yet been officially made to the Ministerial Order. Moreover, Insurers continue to incorrectly claim that the maximum payout they can award under plumbing insurance policies is $50,000, having significant consequences on plumbers and consumers.

The Impact of Incorrect Capping

Arbitrarily capping claims undermines the consumer protections provided for by the Ministerial Order, and unaware plumbers may find themselves personally liable for damages exceeding this amount. Additionally, affected parties, including homeowners who are entitled to claim directly on plumber’s policies, may face challenges in obtaining full compensation for damages.

For more information or assistance with domestic building and plumbing insurance disputes, please contact our team at Brixton Legal. Our experienced team can help you navigate the complexities of insurance claims and ensure your rights are protected.

(03) 9088 2106
eric@brixtonlegal.com.au
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(03) 9908 2106
rachel@brixtonlegal.com.au
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