The ACT Office of Regulatory Services has questioned QBE after the company refused to pay out home warranty claims lodged by victims of the Sublime Constructions collapse, a spokeswoman for the insurance giant said.
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QBE has cited the ORS investigation as its reason for not answering questions from Fairfax on why as many as 13 affected Sublime Constructions homeowners with total losses in excess of $1 million have been denied cover under their home warranty insurance policies.
Fairfax believes potential HWI claims against QBE as a result of Sublime's liquidation could run to between $500,000 and $1.1 million. Sublime Constructions went bust earlier this year with total debts of more than $4 million.
ORS told Fairfax it had investigated claims Sublime staff had tampered with QBE insurance certificates, not the company's refusal to pay out on policies, between June and September.
"The matter was referred to ACT Policing on September 2," an ORS spokeswoman said.
Home warranty insurance covers faulty workmanship for up to six years after a home is built and the disappearance, death or insolvency of the builder before the project is completed.
"Given the matter is still under investigation, it is not appropriate for us to comment on specifics at this time," a QBE spokeswoman said.
Sublime Constructions switched its home warranty insurance to QBE early in 2013 after it was refused further insurance cover by the Master Builders' Association ACT Fidelity Fund.
The company went into administration in February and once liquidators were appointed on March 24, 2014, individual owners, including Tanya Nguyen, applied to QBE for payouts to finish their homes.
QBE refused, saying the entity that had taken out the policies, Sublime Builders, was not the entity that had built the homes, Sublime Constructions.
"QBE issued a certificate for work done by Sublime Builders," QBE told Ms Nguyen in a letter dated August 15, 2014. "QBE never issued a certificate for the work by Sublime Constructions and Development Pty Ltd so there was no insurance for that company whereby QBE was on risk."
With individual claims capped at $85,000 under ACT law several homeowners have told Fairfax that even if QBE did pay up they would still be out of pocket by $100,000 or more.
Ms Nguyen and Ms Ha have questioned the legality of QBE's decision, saying it contradicts Section 92 of the ACT Building Act and the company's own policy document.
The Building Act states "an authorised insurer is not entitled to avoid liability… because the policy was obtained by misrepresentation or nondisclosure by the builder".
The policy document states "We (QBE) will not either refuse to pay you (sic) claim under this policy or reduce any payment under this policy on the ground (sic) that the builder or speculative builder failed to comply with the duty of disclosure or made a misrepresentation to us".
QBE's refusal to pay out on the policies has exposed what Master Builders Association deputy executive director, Jerry Howard, described as a "worrying loophole" in home warranty insurance coverage in the ACT.
He noted the 13 partially completed homes had been issued with commencement notices signed by the ACT Government's Construction Occupations Registrar and that many had since been issued with certificates of occupancy.
Either of these is taken as proof appropriate home warranty Insurance is in place and that future purchasers have recourse against faulty workmanship and structural failure.
Mr Howard said if QBE applied the same due diligence to its HWI applications as the Master Builders Association's Fidelity Fund did the problem would not have arisen. The MBA Fidelity Fund will not issue a HWI policy until it has sighted a copy of the page of the contract naming the builder and the client.
Ms Nguyen and Ms Ha told Fairfax they and the other Sublime Constructions collapse victims were being penalised for QBE's failure to conduct adequate due diligence.
QBE has defended its practices, saying "in the ACT a builder seeking to take out a QBE Residential Builders Warranty Insurance Certificate makes an application to us through an insurance broker. Each of our brokers have their own processes."