New ethics, new liability?

The new Code of Ethics has the potential to change your liability, but not as much as you might think. BuiltIn construction insurance expert Ben Rickard explains more 

From October 2022, Licensed Building Practitioners (LBPs) have needed to comply with a Code of Ethics. These types of codes are common across many industries and increasingly being mandated by Government for licensed occupations, such as builders and financial advisers.

But does being subject to the code standards increase your risk of being held liable for an alleged breach? And, if so, what are the penalties and can these be insured for?

Since licensing became compulsory in 2012, our view has always been that holding a licence does not increase your liability. If you make a mistake, there is enough common law and legislation to ensure you’re held responsible for that, licensed or not. That’s the same for anyone operating a business or providing a professional service.

Expanded responsibilities

The differences with holding a licence are that the person who was at fault can be tracked down more easily, and that there is a system in place to censor people who fail to meet their obligations, in addition to legal remedies like court action.

The new Code of Ethics expands the number of things that a complaint can be made about to the Building Practitioners Board (the Board). The Code of Ethics has what would seem like pretty obvious stuff in it, like taking responsibility for informing and educating your clients, advising clients of delays and complying with the law. 

Sounds pretty straightforward, but if you review some of the complaints to the Board over the years, you might feel differently. While there was no Code of Ethics, complaints could be laid against LBPs for ’bringing the scheme into disrepute’, and most of these would also breach the new Code of Ethics.

So, could you face a licence complaint because a disgruntled client alleges that you have not ’behaved professionally’? Or that you have not priced the job ’fairly and reasonably’? Quite possibly.

Insurance cover that would pay the cost of defending a complaint, as well as any fine imposed, is available and well-priced. Some insurers will include it as part of statutory liability insurance, while others offer a standalone policy that includes additional benefits as well.

In a nutshell

Many professions are subject to a Code of Ethics, and breaches of these can be referred to a disciplinary committee. LBPs are now covered by a similar system. Insurance is available to cover the cost of defending these complaints, as well as any fine imposed. 

Builtin are New Zealand’s trade insurance experts. For more information visit www.builtin.co.nz, email Ben Rickard at ben@builtin.co.nz or call him on 0800 BUILTIN.