Brought to you by:

Court backs builder over Atlantis cladding claim notification

The Federal Court has found against insurers in a dispute over whether they were notified about a possible professional indemnity claim over flammable cladding on the 36-storey Atlantis Towers building in Melbourne, amid wider concerns generated by the Lacrosse fire.

LU Simon Builders has been involved in Victorian Civil and Administrative Tribunal (VCAT) and County Court proceedings over Atlantis Towers aluminium composite panels (ACPs), with the owners’ corporation and the developers taking action after an order to remove the cladding.

Excess layer insurers MS Amlin and Lloyd’s underwriter Brit argued a policy for the year to June 30 2015 didn’t respond, given a claim wasn’t made during the period nor was a notice of facts giving rise to the claim provided at that time.

The hearing on the issue, considered as “a separate question”, focused on emails from broker EBM Construction & Marine to insurers on May 5 and May 14 2015. The emails were sent following the November 2014 fire at the Docklands Lacrosse apartments, also built by LU Simon.

The May 5 attachments included an article from The Age and a document on Lacrosse. They note the cladding brand used at Lacrosse, which was different to the product at Atlantis Towers, and include Metropolitan Fire Brigade (MFB) comments and that the Victorian Building Authority (VBA) would look into the conduct of LU Simon.

The May 14 email, also with the subject line “Potential Claim”, included a copy of the design and construction contract, “which was the basis of Lacrosse” and provided the MFB post incident analysis, which contained a report by municipal building surveyor MBS in an appendix.

Justice Ian Jackman says information given to the insurers pointed to an issue not confined to the Lacrosse fire, or its particular cladding brand, and reflected “a wider problem concerning the use of non-compliant and unsafe ACP products on other buildings in Australia”.

“That was referred to as a problem for LU Simon generally and the buildings which it had constructed, as well as for other builders which had used ACPs,” he said.

Opinions expressed in the MBS and MFB reports were given weight that was important in providing notification of “facts”, as required by the Insurance Contracts Act.

“That they were stated by the relevant public authorities with appropriate expertise to express those opinions is itself a 'fact' which might give rise to a claim,” Justice Jackman said.

“It does not matter that the potential claimants were not identified, although the developers, owners or owners’ corporations of buildings which had non-compliant and unsafe ACP cladding would be obvious candidates to be making such claims.”

Justice Jackman says there’s a clear causal connection between the VBA investigation, referenced in the notifications, and the progression to the Atlantis claims.

In subsequent cascading events, MBS issued a building notice, which was followed by an order on August 20 2019 requiring that the owners’ corporation replace the Atlantis Towers cladding by December 14 2020. Proceedings ultimately started by the owners’ corporation claimed damages for the cost of compliance with that building order, while the developer made corresponding claims, Justice Jackman says.

The court judgment says that the answer is “yes” on whether notice was given of any facts that gave rise to the Atlantis Claims, as contemplated in the relevant section of the Insurance Contracts Act.

The decision is available here.