It is ironic that in attempting to build a home, owners through no fault of their own end up homeless!

Every part of the ‘con-sumer protection strategy’ has been broken for more than 20 years.

Insurance is but one example of the issues with the scheme. For consumers who build or renovate, the Government mandated that they pay for ‘Last Resort’ Builders’ Warranty Insurance. There is no other class of ‘insurance’ operating anywhere in the world like BWI because it is not a typical form of insurance, where one pays a premium to mitigate against risk, with the guarantee of payment if the risk is realised. Owners are forced to pay for what is actually ‘No Resort Insurance’, where 99 per cent of owners have not been able to make a claim, much less get any payout. BWI is ‘non-insurance’, where consumers’ ‘donations’ flow to insurers and brokers.

Introduced in 2002, under the guise of offering consumers limited protection, BWI offers no protection for home owners. In order to trigger this non-insurance, the builder has to die, disappear or become insolvent. Few builders die, fewer disappear only to later be ‘found’ by the insurers. As for insolvency claims, the insurance companies refuse to pay out on genuine claims or offer a pittance of the full entitlement. This scam has proved been a godsend for insurance companies and brokers, the beneficiaries making multi-millions of dollars from consumers’ compulsory donations.

In order to appreciate the magnitude of this swindle, let us look at some statistics.

In 2011, it was revealed that during the previous year, more than 53,000 Victorians had paid an estimated $87.8 million for ‘warranty insurance’ on home building projects. Around $38 million went in premiums, with most of the other $39.8 million gifted to insurance brokers as commissions.

The shocking reality is that from this pool of nearly $88 Million, only three owners managed to make successful insurance claims that year, for a grand payout of $108,476! Lots of money went in, but little was paid out, and consequently the minute claims-loss ratio of 0.12 per cent! So much for ‘warranty insurance’ and a safety net. It is a mega million dollar scam!

The best way to appreciate how this scam rewards insurers is to consider a real story. One such case involves Alex Furman and Lana and Igor Kozak. They engaged a ‘registered builder,’ with CBL Insurance Limited providing the BWI. The building phase was disastrous and after years of heartache, the builder declared himself to be insolvent and the BWI was triggered.

The owners thought this would offer a lifeline, but no! They lodged a claim with CBL in April 2013, providing all the evidence of defects and invoices to substantiate their expenses. CBL accepted liability for defects in May 2013.

Prior to the builder becoming insolvent, the owners discovered many defects and sought advice from Consumer Affairs Victoria (CAV). Several CAV officials informed them that under the Domestic Building Contracts Act, if they were unable to find a builder willing to rectify as in this case, the original ‘builder’ could be paid for rectification. The owners were assured that this was in line with the DBCA!

After lodging their claim with CBL, Alex and the Kozaks provided proof of money paid for materials, rectification works and payments to the builder and trades, and they claimed for work still to be rectified. They answered the many questions put to them by CBL in an endeavour to overcome the hurdles hindering them from achieving a just outcome. When they lodged their claim 16 months ago, the owners were entitled to be paid for all the defects which had been rectified and those still outstanding. At present, a Building Notice is on the property what is built is non-compliant with the Plans.

According to the owners, CBL was provided all the supporting evidence for their genuine claim, $740,000 for defects rectified and around $200,000+ for defects yet to be rectified. However in August 2013, CBL offered a mere $17,500, with a story that the owners had been at fault! But this was false. The ‘offer’ was not based in law and ignored the facts. The owners would not accept the offer as full payment and sent the cheque back to ‘No Risk CBL’; if you do not intend to ever pay out, then there are no risks! To date, CBL has not paid one cent of this legitimate claim!

After CBL offered the paltry payout, blaming the owners for paying the same ‘builder’ for rectification, the owners again contacted CAV. Once more, they spoke to several officials, who confirmed that CBL’s assertions were baseless, and CAV also confirmed that the owners had done nothing wrong and their actions had not jeopardized their genuine right to claim and be paid. In fact, it is unclear as to how this figure was arrived at, and quite apart from the issue of the original builder being paid for rectification works, CBL ignored all the accounts paid by the owners for materials and labour and the amount required to be spent on rectification works.

The owners pleaded for assistance from every quarter – from their local member, Georgie Crozier, who committed to help, but did nothing. Many letters and appeals in person were made to Robert Clark, the ‘junk’ insurance Minister, who gave no response. Then they reached out to Heidi Victoria, Minister for Consumer Affairs, and again got nothing!

After three months of CAV considering the case, in August 2014 the owners were informed that CAV would not pursue CBL. CAV’s position now is that it has four entries (of the owners’ calls) recorded, but that these do not disclose that any advice was given to the owners to make payments for rectification work.

How could CAV only retain half the records? Furthermore, the Acting Director, Phil D’Adamo stated that this was “consistent with CAV’s practice”, which was “never to advise a party to make a payment for goods and services.”

To suggest that CAV does not advise consumers to make payments is totally false. We have countless examples, this writer but one, where CAV has advised owners to pay the builder more money, often regardless of the builder’s entitlement to payment.

Finally, D’Adamo advised Alex, Lana and Igor to go to VCAT. CAV refused to assist them, and in stark contradiction to its advertised slogan: ‘We’re Here To Help!’

Obviously, the owners have no money to pay lawyers to take CBL to VCAT. Not only have they suffered a huge loss and had to meet mortgage payments for years, they are now facing bankruptcy because of CBL’s refusal to pay them and CAV’s decision not to intervene and defend their consumer rights.

CAV’s poor performance is on the public record: falsifying statistics (Victorian Auditor-General’s Office Report on Consumer Protection 2013); ignoring Government directives (Victorian Competition and Efficiency Commission Report on Housing Regulation, 2006); and countless of examples of its failure to take any action on breaches of consumer law. CAV has wide powers, and the director has additional discretionary powers, but anecdotal evidence suggests, as in this case, that CAV has elected not to use any of them.

homepage - theageIn relation to CBL, its insurance business is almost exclusively BWI and it operates in various countries around the world. It is interesting to note this extract from CBL’s website: “For most people, the biggest investment they ever make is the purchase of their own home. The industry is full of examples of home owners who buy their dream home from a builder or developer and then discover defects in the home only after they have taken possession. CBL is able to offer these buyers a Builders Warranty which provides peace of mind when purchasing a new home.”

At the heart of the aforementioned case is discovery of defects!

As CBL’s fortunes have soared over the past decade, building consumer detriment has escalated dramatically.

The story of Alex, Lana and Igor is tragic. They attempted to build a home and now all three are faced with being homeless. Despite CBL’s mantra, for these three innocent victims, their CBL experience has provided no peace of mind. The builder, the building regulator, CBL, CAV and those in their roles as responsible Ministers have all failed these three people and continue to fail home owners. Those we elected to protect and defend consumers’ rights have been captured by the vested interests, their preference to support profits over people. This is why we have a consumer catastrophe, with 250,000-plus Victorian owners harmed every year in Victoria – not a natural disaster, but a man-made disaster!

CBL and CAV were contacted for comment. Unfortunately, neither was willing to speak on the matter and they appeared to have little regard for the plight of these now homeless victims.

By: Anne Paten
  • Politicians fighting for re-election; time to take on the hard & very real issues such as this shocking building industry? In our eighth year of the most emotionally & financially debilitating fight for accountability and prosecution of our disgusting builder where instead of assistance, we are further damaged by the very bodies promoting themselves as 'protectors' of consumers – Consumer Affairs & the building regulators. So proficient when it comes to ensuring they receive their 'cut' of tax & red tape dollars but worse than useless when confronted with their utter failure to control, regulate and prosecute effectively, if at all. All eating away at your family's financial & emotional resilience, hoping you'll disappear or give up.

  • Andrew Heaton
    Industry Journalist
    3 years, 1 month ago

    For claims totalling $940,000, a payout of $17,500 would be nothing short of a farcical disgrace, especially where the insurer has provided no evidence whatsoever about how the claim was calculated.

    Based on the facts as described (which I certainly imagine are fully researched and supported), the behaviour of the insurance company in this case draws comparisons with that featured in The Rainmaker.

  • What a shocking story of despair and suffering! It is hard to understand how insurers can get away with not paying valid claims. It must be soul destroying to have nowhere to go to get help. If sympathy were dollars–you would have a lot from me!

  • Polly's take note, my vote at the next state election will be decided on how you address the Builders Warranty Insurance scam and introduce real consumer protection together with a "functional" and empowered Victorian Building Authority.

    Default vote will be against the current political party.

  • In 2012 the Victorian Building Commission found our builder, Bur*^%$ Homes to be responsible for causing the defect of slab heave to our home when they built it. As this article says, BWI is not worth the paper it's written on and we found the hard way that it didn't help us at all. The Ministers for Building, Consumer Affairs and the Attorney General's department have all declined to help us. Mediation through BACV isn't worth the paper it's written on because no one will enforce it. Bur*^%$ Homes continue to refuse to compensate us because they think that no one will make them. An inquiry into this unethical, heartbreaking system must be held before it ruins any more lives, like it ruined ours.

  • Congratulations Anne on taking these matters forward on 774's John Faine program and with me last Thursday 28 August on 3mdr 97.1fm creating more meaningful publicity to raise awareness of consumers' building plights and in the face of meaningless reforms muted by State Government.
    If you want to hear just how well Anne aquits herself have a listen just after 9 a.m. by logging on to, go to programs and the time slot Thursday.

    I was so impressed with Anne and her cause, I've entered her interview with me in the Walkley Journalist Media awards. Congrats Anne and keep up the good work.
    Judy-Ann Steed Independent Broadcast Journalist..

    Keep up the good work.

  • The Government tolerance to Building Insurances behavior is just outraging. How can they do nothing about injustice of Insurance Companies and support a low, which allow these Greedy Fat Cats to make a billions of dollars without any responsibilities, completely ignoring the claims and robbing people like a usual criminals, destroying their lives.

  • It is more and more cases lately when Consumers Affairs of Victoria doing nothing to protect our rights. What do we really need this organization for if it doesn’t serve its purpose? They just sitting in their chairs, doing nothing and getting a very good salary from our losses.

  • This is one of the most heart wrenching stories that I have read in a long time. How is it possible for our Government to know that this is happening and allow it to continue? How can the Government consent to such harm being done to innocent people? How can those in senior roles at the CAV support the insurers in acting in bad faith and all of these officials retain their jobs? The insurance companies have accepted the premiums, presumably knowing the history of those that they agreed to insure and the subsequent risks to the community, yet the Government takes no action to assist consumers. Even worse, its actions ensure that the owners will suffer more harm. It is most definitely time for all of us to stand up and put a stop to this rort

  • This story is related to our family. We have been seriously damaged from the builder and insurance provider. We have tried to reached out to the minister of justice but we got no answer. We have also reached out to our local member of parlement who promised to help us but did not do anything. We are now in a shocking situation and waiting on appropriate action from the government.

  • We are one of the very very fortunate few that have actually made a successful claim on builders warranty insurance.
    But that was only because our so called builder actually went bankrupt and then disappeared, so therefore we actually met 2 of the 3 criteria needed to lodge a claim, but even that’s no guarantee of having your claim accepted and fairly paid out by the insurer.
    God help you if your builder simply decides to abandon the construction of your house and/or start up under a new company name, then your stuffed.
    Mind you it was no walk in the park lodging a claim or getting the insurance company to agree to pay the amount needed to cover the costs to rectify all the faults and dodgy workmanship on our house.
    I truly believe the vast majority of consumers building a new house have absolutely no idea that the so called ‘builders warranty insurance’ they’re paying for offers them next to no protection whatsoever.
    Everybody I’ve spoken to that’s building a new house mistakenly believes they’ll be able to simply make a claim if anything goes wrong (just like you can with any other insurance you normally take out), I hope for their sake the never have to go down that road!
    The whole building warranty insurance industry is nothing but a scam and the government (both federal and state) should hang their heads in shame for allowing it to operate like this for so long causing unbelievable stress and heartache to so many.

  • This is disgraceful, what is the point of having an insurance company if they do not support what they are there to do.
    Insurance companies are the types of people that should be locked away for fraud. They happily take money for a service but when things go wrong they are no where to be found to deal with the consequences of the person they have insured.
    They re making people that are trying to make a living by doing the right thing these insurance companies they are just shutting down peoples hopes and dreams when things go wrong.
    If they're not planning on helping then why are they taking money off people.

    This is appalling and i hope this gets resolved in the manner it should be and that is the Financial institution (insurance) doing w

  • I have read this article & felt as If my story was published. I also have lodged a claim last Sept with CBL insurance, as builder went bankrupt.
    The defects which were left by the builder were affecting everyday of living, such as not being able to have a shower , electrical issues, and other serious problems. After the matter was dragged & CBL eventually had accepted the liability they still have not reimbursed us. I had written to Min. Mr. Robert Clark & Min Ms. Heidi Victoria never had been given appropriate response from neither of them, After reading this article I realised that my Claim would never be paid.
    The government should take our problem seriously. The insurance companies have no one to answer to. Shame on you CBL

  • This is appalling how can these people call themselves insurers if they can't even provide what they are suppose to provide as a service. I feel so sorry for these poor people who have been subjected to this unseen improper action by the insurer. $940,000 claim and to be offered $17500 is shocking. I hope these people get what they deserve

  • Its gone on for so long, it illustrates the flaws in our government system along with the collusion of shonky trade associations.
    They continue to profit from these shams at the expence of all Victorians.
    Parlaiment has 2 more weeks to pass the new warranty legislation before the coming election. We have all been told this will happen and it now looks likely to not see the light of day- More shame and shams- all pollies should be ashamed!!!

  • Thank goodness that this home building and insurance issue, of which so many have been victim, is now attracting public attention. The money lost by families and individuals is criminal especially when this money has been paid to organisations which are not regulated or accountable. By their inaction and lack of intervention the State Government is condoning this unjust (to the public) relationship between some builders and building insurers. As is becoming increasingly the norm, individuals and families do the right thing (insure!) but have no security or protection from those mandated to provide this. I commend the Building Compliance Reform Association and the media who are now giving Ms Paten air time to present this critical issue.

  • Pigs will fly, when insurers admit to nurturing their BWI golden goose! Scamming families by concealing a builder's claims history. Unbeknown to us, our 'builder' had previous successful warranty claims against his defective delivery, he was in VCAT over a further claim at the time of quoting on our project and yet they once again awarded insurance cover for our home which, according to him, is one of 'hundreds' he has built! Homeowners are unable to access a builder's warranty claims history to PROTECT HIS PRIVACY. Shamefully, regulators, aware of the builder's history, do NOTHING to prevent injuring other families, allowing ongoing registration to further con homeowners into believing their builders are competent. Shame on them all.

  • My heartfelt sympathy to the Kozaks. Yet another example of the results of successive Victorian Government Parties allowing the complete control of all aspects of the building industry to be overseen by the builders themselves. Including our so-called, governing, consumer protection authorities, whose staff have been seen to continually favour builders and their industry in their decisions, and rule outcomes to the disastrous detriment of consumers! Including my own disastrous home building experience. Completely disgraceful behaviour CGL, and Consumer Affairs! Pollies indeed take note! I’m one of many calling for a Royal Commission into this Building Industry Consumer Crises! Not interested and no vote with us for this, no vote for you!

  • It is incomprehensible that in Australia something so basic as the construction of a house can be so destructive.
    It is even more incomprehensible that in Australia its citizens cannot rely on the structures put in place by their elected government.
    All those who are in collusion and allow this to continue should hang their heads in shame.
    Good on you Anne!

  • this is outrageous and very unfair. someone must put an end to this.

  • What can one say! It sounds incredible that organisations that are supposed to protect the people of Australia are not doing it, and yet, we are all dependent on them when we wish to provide shelter for ourselves, our children and their children. The building industry and allied industries and the insurance industry impact on all our lives and are a big part of providing jobs and economic stability. I don't understand how the present government and past governments have not done something to ensure that the bodies set up to regulate the building and insurance industry, are actually doing their proper job. One answer might be that people choose not to build a new house and save themselves the heartache and financial disaster.

  • I find this unbelievable!
    Something needs to done about this injustice. Thank you Anne for that you are doing in this space. 'Our' politicians need to be ashamed of themselves for ignoring people in such desperate situations. Let's make this an election issue!

  • It filled me with despair to learn that this sort of thing is happening with impunity. The frightening thing is that it seems that building or renovating is like playing a game of Russian roulette. How can this be permitted to happen? It’s incredulous to think that no-one is aware of what is going on.

  • This story shows how Australians do not reliably covered by insurance, the company simply entice money from people and do nothing when we need help! Very interesting how much insurance management get bonuses every year to do nothing? Here is the business! Very sad …

  • Thank you Anne for highlighting what is happening to so many of us. Over and over I hear the same story, and it is the same story that is currently happening to us. I know there are many thousands of us out there with non compliant builders who have left us in financial and emotional ruin. Now is the time to step up and let everyone know that this is not ok. Singularly we cannot do anything, but together we can put pressure on the government and regulators. For too long we have all been battling away separately allowing the system to run us into the ground.