The New Zealand Institute of Building Surveyors (NZIBS) has backed the government’s decision to replace joint and several liability with a proportional liability model in the construction sector, describing it as a fairer way to allocate responsibility for building defects.
The reforms, unveiled by Building and Construction Minister Chris Penk, mark a major change to the consent and liability system that has long drawn criticism from industry participants.
Under the new framework, liability will be shared according to the level of contribution each party made to a defect, rather than falling disproportionately on councils or those with greater financial capacity.
Former NZIBS president Darryl August – who sat on a Ministry of Business, Innovation, and Employment (MBIE) roundtable earlier this year – said industry stakeholders were largely united on the need for change.
“We were clear that proportional liability is the fairest way to allocate responsibility in construction,” he said. “It ensures that those who actually cause the problems are the ones who pay to fix them. That’s a major improvement on the current model, where blame often falls disproportionately on councils or parties with the deepest pockets.”
While supporting the move, NZIBS has warned that proportional liability cannot succeed without strengthening the insurance framework and professional standards.
August said countries where proportional liability is effective require builders and contractors to maintain professional indemnity cover, with warranties backed by insurance. New Zealand’s current market, he said, does not provide that level of support.
“New Zealand’s construction insurance market isn’t currently geared for that. Without those foundations, the policy can’t succeed,” he said.
He added that a review of the Licensed Building Practitioner (LBP) regime was also needed, given many practitioners may not meet the standards necessary for insurance eligibility.
“A lot of the current workforce wouldn’t meet the standard needed to obtain cover. That tells you the LBP system isn’t working as intended,” August said. “So, if we want proportional liability to work, the LBP scheme needs a serious overhaul. Overall, though, we applaud the direction. Now, the real work begins.”
The local discussion comes at a time when the global construction insurance market is showing signs of easing, according to a recent report by Gallagher Specialty.
After several years of premium increases and strict underwriting, new capacity and heightened competition are leading to softer market conditions.
Gallagher noted that premium reductions are most visible in annual contractor programs with strong loss histories and in projects with limited exposure to natural catastrophe risk.
Insurers are also offering multi-year agreements with locked-in rates or scheduled discounts to secure business.
High-risk projects – such as those exposed to earthquakes, floods, or windstorms – are still technically priced, but competition is increasing in other areas as more market entrants, including MGAs and new follow-market providers, expand available capacity.
