Victorian Plumbing Insurance – when can you claim directly on the plumber’s policy?
Facts
Ms O’Connell owned two residential properties in Windsor, Victoria, and engaged Lentelle Pty Ltd under separate domestic building contracts to redevelop the properties. Disputes subsequently arose concerning defective building work, leading Ms O’Connell to terminate the contracts and commence proceedings against the builder in the County Court of Victoria in late 2022.
During the proceeding, a joint expert report identified defective underground plumbing as a primary cause of the defects at both properties. The builder subsequently joined two plumbing contractors — Nix Plumbing and JD Fenton Plumbing and Drainage Pty Ltd — as third parties, alleging they had carried out the relevant plumbing works. Nix performed the plumbing works at the Lincoln Place property, while JD Fenton performed the plumbing works at the Mary Street property.
In May 2024, the builder entered liquidation, resulting in the proceeding against it being stayed pursuant to the Corporations Act 2001 (Cth). Ms O’Connell then received the maximum payout available under the domestic building insurance policy.
Ms O’Connell subsequently sought leave to bring direct claims against the plumbers and an additional plumber, Ward Trevaskis, who allegedly supervised part of the plumbing works and issued a certificate of compliance for the Mary Street property. The plumbers were joined as defendants, with the plumbing claims listed for trial in the County Court in June 2025.
O’Connell v Lentelle Pty Ltd: Clarity or Confusion for Victoria’s Plumbing Insurance Scheme?
The Victorian Court of Appeal’s recent decision in O’Connell v Lentelle Pty Ltd (in liq) [2026] VSCA 76 is somewhat significant concerning Victoria’s mandatory plumbing insurance scheme.
For practitioners acting in plumbing defect disputes, the decision is now essential reading. For owners, builders and claimants attempting to access mandatory plumbing insurance, however, the decision may create as many questions as it answers.
At its core, the case concerned whether homeowners could directly enforce a plumber’s mandatory insurance policy before liability against the plumber had first been established.
The Court answered that question largely in the negative.
Yet the broader implications of the decision extend well beyond that narrow issue and expose longstanding structural problems in the operation of Victoria’s plumbing insurance regime.
The Application
The proceeding arose out of defective plumbing works where Ms O’Connell sought to pursue the insurers of licensed plumbers directly under the Licensed Plumbers General Insurance Order 2002 (“Ministerial Order” or “MO”).
Ms O’Connell argued, in substance, that the mandatory insurance framework was intended to operate as a meaningful consumer protection mechanism permitting claimants to access insurance protection where defective plumbing work had caused loss and damage.
The insurers resisted that position, contending that the policies were liability policies issued for the benefit of the plumber, not first-party compensation policies for the benefit of homeowners.
The Court ultimately accepted the insurers’ construction.
How the Court Characterised the Ministerial Order
Importantly, the Court summarised the operation of the Ministerial Order in the following way:
(a) The MO is a statutory instrument which requires a plumber to take out certain insurance cover in order to be eligible to be licensed under Part 12A of the Building Act.
(b) That insurance cover must indemnify the plumber (not the building owner) with respect to the categories of liability set out in Part 2, for at least the amounts set out in Part 3.
(c) The insurance policy must contain the terms set out in Schedule 2, may contain the terms set out in Schedule 3, and must not contain provisions that have the effects specified in Part 4.
The Court also emphasised that the scheme is fundamentally one of liability insurance protecting the plumber, rather than a direct compensation scheme automatically benefitting homeowners.
At the same time, however, the Court expressly recognised the consumer protection purpose of the scheme, stating:
“It ensures that some funds will be available to compensate home owners in that event. In that sense, it is a consumer protection measure.”
That observation is significant.
The plumbing insurance scheme was first introduced in early 1997 alongside the introduction of self-certification for licensed plumbers. At the time, the then Minister for Finance, Hon R M Hallam, explained in Parliament:
“By way of context and background, the Building (Amendment) Act introduced a system of self-certification for plumbers. To protect consumers the system is underpinned by a requirement that participants in the system carry adequate insurance.”
The original legislative intent was therefore plainly consumer-focused.
The Court’s Emphasis on “Establishing Liability”
A major feature of the Court’s reasoning was its repeated emphasis on the need for a claimant to first establish the plumber’s liability before compensation can be obtained from the insurer.
The Court stated:
“If the plumber’s liability for the loss and damage is established (or accepted), the claimant is entitled to be compensated by the plumber for that loss and damage. If the plumber is then unable or unwilling to satisfy that obligation and refuses to claim on the mandatory insurance required by the MO, the claimant may claim on the insurance directly.”
This aspect of the judgment is curious.
For those practising in this area daily, it is well understood that insurers routinely take the position that claimants have no standing to pursue claims directly. Common responses include:
“You can’t claim on this policy.”
“The maximum cover is $50,000.”
“Legal costs are not covered.”
“Our plumber didn’t do it.”
“The claimant is not the insured.”
“You’ve got the wrong insurer.”
“What does plumbing insurance mean?”
In practice, many owners/builders approach lawyers only after insurers have already rejected claims outright, often before any meaningful investigation has even occurred.
We regularly see situations where insurers:
deny a policy exists before later confirming cover;
deny the claimant the right to negotiate;
dispute that their insured performed the defective work despite a compliance certificate being issued;
redirect owners/builders back to the plumber despite serious defects existing and the plumber previously refusing to return to the property;
reject claims immediately with little or no reasoning.
Meanwhile, plumbers who do attempt rectification frequently lack the expertise necessary to properly diagnose or repair the defects, and understandably avoid admitting liability.
The Practical Reality of the Scheme
The practical operation of the plumbing insurance scheme has long differed from the way many owners/builders assume mandatory insurance ought to function.
The scheme was clearly intended to operate as a social protection mechanism accompanying self-certification. In many respects, it resembles other statutory protection schemes such as TAC, WorkCover or domestic building insurance.
Under those schemes, claimants ordinarily receive:
a formal investigation;
a written determination;
reasons for acceptance or rejection;
identification of the evidence relied upon.
Domestic building insurance provides a particularly useful comparison. Under the domestic building insurance framework, insurers are required to issue formal coverage decisions identifying which defects are accepted or rejected and why.
The Ministerial Order governing plumbing insurance contains a similar requirement. Insurers are required to:
“notify the person making the claim within 90 days from when [the insurer] receive the claim in writing that [the insurer] accept or dispute the claim”
Failing that, there is a deemed acceptance mechanism.
Yet in practice, insurers, loss adjusters and solicitors commonly reject claims almost immediately upon receipt, frequently without any substantive investigation whatsoever. Once the rejection is communicated, the insurer then takes whatever time it wishes to investigate the matter.
That is plainly not how the Ministerial Order was intended to operate.
The Continuing Uncertainty After O’Connell
One of the most difficult unresolved issues following O’Connell concerns what actually constitutes a plumber “refusing” to make a claim.
This matters because refusal by the plumber is one of the triggers permitting a claimant to enforce the policy directly against the insurer.
The Court appeared to contemplate that, ordinarily, the plumber should be the party making the claim on the policy.
That creates substantial practical difficulties.
The Building and Plumbing Commission (“BPC”) routinely:
provides owners and builders with the plumber’s insurance details;
directs claimants to pursue insurance claims directly;
treats the scheme operationally as though claimants are entitled to engage directly with insurers.
At the same time, however, the Court’s reasoning suggests claimants may have very limited standing to do so.
The confusion is compounded further by the BPC’s longstanding reluctance to issue formal rectification notices against plumbers. In many cases, the BPC merely sends informal emails requesting rectification, often without meaningful enforcement consequences for non-compliance.
Plumbers are sometimes even given the option of either:
rectifying the defects themselves; or
allowing their insurance details to be passed on to facilitate an insurance claim.
Against that practical background, the Court’s conclusion that claimants possess no automatic right to claim directly under the policy leaves substantial uncertainty in the operation of the scheme.
Unlike Builder’s Warranty Insurance
Importantly, plumbing insurance differs fundamentally from domestic building insurance.
Under domestic building insurance, claimants generally cannot access insurance unless the builder has died, disappeared, become insolvent, or failed to comply with a rectification order (the last trigger as of July 2026).
The plumbing insurance scheme contains no such gateway requirements.
That distinction has always suggested that the plumbing scheme was intended to provide a more accessible form of consumer protection.
Yet the practical effect of O’Connell may be to significantly restrict that accessibility.
Clarity or More Confusion?
Some commentators have suggested that O’Connell provides long-awaited clarity. In some respects, it does. However, the decision also arguably muddies the waters further.
The judgment leaves open significant unanswered questions, including:
what conduct amounts to a plumber “refusing” to make a claim;
how a claimant practically compels a reluctant plumber to engage with insurers;
what rights a claimant truly possesses when insurers reject claims outright;
in circumstances where claimants and plumbers have 6 years to notify the insurers of a claim in order for the insurance to respond, what is a claimant supposed to do when the 6-year limitation approaches and their standing to even bring a claim is questioned;
how the scheme is intended to operate where the BPC itself directs claimants to insurers.
Ultimately, meaningful clarity will likely require legislative reform rather than further litigation. Until reform is actioned, owners, builders, plumbers and insurers alike will continue operating within a framework that remains uncertain, inconsistent and increasingly difficult to reconcile with the practical realities of modern defect litigation.
What this case confirms is that plumbing insurance claims in Victoria require specific expert evidence and specialist legal representation for a successful outcome.
How we can assist…
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If you’re facing a situation like the one discussed above, you do not need to face these issues alone. We’re here to protect your interests and work towards the outcome you deserve.
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