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Neglecting Australian Standards #1: Insurance Cover up in Smoke

In our next two legal updates, we’ll dive into some very unfortunate stories that highlight why you should pay very close attention to Australian Standards – or risk losing your insurance cover.

In this instalment, we’ll take a look at how disregarding Australian Standards that apply to scaffolding and steel cutting left 2 very unfortunate businesses exposed.

And in our next update, we’ll see how the actions of a hapless crane operator and the requirements of AS 1418.5 – 2002 Cranes, hoists and winches contributed to a decade-long court battle in Queensland.

A “shocking” turn of events

Picture this: an apprentice plumber in suburban Melbourne, innocently carrying metal guttering while walking on scaffolding erected perilously close to live overhead wires. Suddenly, the unexpected happens – the apprentice gets electrocuted and suffers serious burns.

The scaffolding company known as “Dhillon Scaffolding” had public liability insurance. But here’s the catch – the insurer had the right to deny cover if “reasonable steps” were not taken to comply with AS/NZS 4576 1995 Guidelines for Scaffolding. And deny cover is exactly what the insurer did. Because contrary to the Guidelines, Dhillon Scaffolding had failed to obtain a permit that was required when erecting scaffolding near live power lines.

In a desperate attempt to win back its insurance coverage, Dhillon Scaffolding took its insurer to the Supreme Court of Victoria. Dhillon argued that it was just following orders as a sub-contractor, and it was the head scaffolding contractor’s responsibility to obtain the permit. Unfortunately for Dhillon, these arguments fell flat. Not only in the first court case, but also in the Court of Appeal, and then at the High Court.

So after years of legal battles and mounting expenses, Dhillon Scaffolding had to contribute towards the significant payout to the injured apprentice. To add to this, Dhillon had also faced prosecution by WorkSafe Victoria for serious breaches of occupational health and safety laws, resulting in a hefty $100,000 fine. Talk about a jolt to the system.

Ignoring Australian Standards: fiery consequences

From scaffolding gone wrong in suburban Melbourne, we move to a rural setting in New South Wales. Employees of plumbing contractor “Advanced Plumbing and Drains” found themselves facing a different kind of shock when cutting steel mesh in a trench in the scorching February heat. Little did they know that the sparks from their power cutter would ignite nearby dry grass, leading to a devastating bushfire.

This fiery disaster resulted in the destruction of over 50 homes and buildings, damage to more than 50 others, and the burning of approximately 3,500 hectares of land. To keep its insurance coverage, Advanced Plumbing needed to show that it had complied with AS 1674.1 Safety in Welding and Allied Processes – Fire Precautions.

The insurer argued that using the power cutter qualified as “hot work”, requiring strict compliance with fire risk minimization and site inspection requirements set out in AS 1674.1. According to evidence submitted by the insurer, Advanced Plumbing had not complied with the requirements of the standard. The Supreme Court of New South Wales accepted this evidence, and a subsequent appeal also favoured the insurer. As a result, the insurer escaped having to contribute towards the very substantial losses caused by the bushfire.

Staying “under the radar”

As these stories illustrate, insurance companies are very well aware of the standards that apply to the businesses that they insure. If an accident occurs, you should expect your insurer to take a very close look at whether the practices that lead to up to the accident fell foul of any Australian Standards listed in your policy. So don’t become the focus of our next legal update on standards compliance. Make sure to know exactly which Australian Standards apply to your business, and have the systems in place to ensure compliance.

Stay tuned for our next article, where we’ll delve into the gripping crane collapse that further highlights the significance of compliance with Australian Standards.

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