The recent NSW Supreme Court ruling in The Star Entertainment Sydney Properties Pty Ltd v Buildcorp Group Pty Ltd was a construction law decision but its sharpest implications could land squarely on the desks of insurance brokers.
The dispute centred on combustible aluminium composite panel cladding installed across three projects at The Star Casino between 2014 and 2016. When defects emerged, The Star sued Buildcorp for rectification costs. Buildcorp, in turn, cross-claimed against the consultants — including the architect — engaged not by it, but by The Star itself. The Court ultimately found Buildcorp was not liable for design-led non-compliance because its contract was "construct only" and expressly excluded design responsibility.
For Matthew Smith (main picture) of Clyde & Co, the takeaway for the broking community is unambiguous: the case reinforces that insurance is built for fortuitous events, not predictable construction shortcomings. Brokers who are still positioning cover as a backstop for cladding and defect risk could be setting their clients up for a fall.
Smith said the decision should fundamentally reframe how brokers talk to construction clients about risk transfer.
"Brokers need to make it clear that insurance should not be viewed as the only risk mitigation measure and that ensuring that an appropriate contract is in place may provide an insured with even greater protection," he said.
That advice is sharpened by the Court's willingness to give weight to Buildcorp's "construct only" carve-out. Where scope is clean and design responsibility is expressly excluded, builders have a fighting chance. Where contracts are ambiguous, insurers are likely to respond accordingly — pricing the residual exposure higher, attaching restrictions, or pressing for fuller documentation at placement.
Smith said insurers are likely to adopt a sharper focus on how risk is allocated in construction contracts, particularly around design responsibility, with unclear scopes justifiably attracting higher premiums or additional restrictions on cover. For brokers, that suggests pricing will increasingly reflect not just the nature of the works but whether the insured has done the contractual housekeeping to back it up.
The second front for brokers is the policy wording itself. The Court's distinction between damage to other property (potentially covered) and the defective work (usually not) is the legal hinge of the case — and it puts every defective workmanship exclusion under the microscope.
Smith is direct about where brokers should be looking. "Brokers should be paying close attention to whether 'resulting damage' must be sudden or accidental, or whether progressive damage is excluded and whether there are any carve outs within the policy wording that could partially restore cover for resultant damage," he says.
His warning is that the existing legal position has simply been clarified — but clarity in court tends to translate into firmer drafting at the desk. Insurers are likely to continue tightening exclusions and become even more precise in defining what constitutes "damage", meaning the gap between what clients assume is covered and what actually is may quietly widen.
That message dovetails with broader market commentary. Marsh's Pacific head of property, Scott Eccleston, recently warned brokers against treating the current softening market as a green light to chase price alone. Eccleston's view is that after years of hardening, "coverage, the terms and conditions of insurers have probably been traded off" and brokers should now be using the softer market to broaden wording rather than simply bank savings.
He has also flagged cladding-style risks specifically, noting that Australia's risk management culture has pushed insureds to address combustible cladding and similar exposures head-on — exactly the kind of pre-loss discipline the Star v Buildcorp ruling now effectively rewards.
Star v Buildcorp doesn't make cladding claims uninsurable. But it does confirm that the courts will not stretch policies to cover the cost of fixing bad work, and it puts contract scope and policy definitions back at the centre of the broker conversation.
For brokers advising construction clients, the decision is less a shock than a starting gun. Those who move first — interrogating scope, scrutinising "resulting damage" wording, and flagging coverage gaps before the next defect emerges — will be the ones whose clients aren't reading about themselves in the next case note.
