WHAT WOULD IT COST YOUR BUSINESS IF A HEAD CONTRACTOR YOU’RE WORKING FOR GOES BUST WITHOUT PAYING YOU?
The Stonewood Homes collapse is a timely wake up call for all building subcontractors to take out insurance to protect themselves from the cost of such an event.
Subcontractors Payment Guarantee cover was introduced to the market in the wake of the collapse of Hartner Construction in 2001. In February 2013 Mainzeal Construction collapsed, leaving subcontractors out of pocket to the tune of around $70m. In February and almost three years to the day since the collapse of Mainzeal, Stonewood Homes NZ, along with its Christchurch franchise, were placed into receivership, owing an estimated $15m to unsecured creditors, including hundreds of subcontracting firms.
“Are your subbies covered if another firm they’re working for collapses? Do them a favour and let them know about payment guarantee insurance.”
These large, high profile collapses are the tip of the iceberg and dozens of firms go bust every year, leaving their subcontractors unpaid for work done. Two other regional Stonewood franchises are currently in liquidation, along with at least a dozen other building companies nationwide. “It may seem counterintuitive but there’s as much risk of a business failing during the boom times as there is during a downturn, and Stonewood is a prime example.”
Subcontractors Payment Guarantee cover reimburses 75% of a subbie’s unpaid invoices in the event that their main contractor becomes insolvent. Limits of $25,000 and $50,000 are available.
“Are you covered if your principal contractor goes into liquidation?”
Although the policy doesn’t cover retentions, these will soon be given greater protection by changes to the Construction Contracts Act, and subcontractors can always opt to provide a bond in lieu of retentions.
Contact Gwenda or Rachael at CBA Insurances to find out more and get a quote.