The Government has announced significant changes to liability rules in New Zealand’s construction sector, aimed at improving consumer protection and creating a fairer allocation of risk across building projects.
The reform moves the industry away from the long-standing “joint and several liability” model to a “proportionate liability” framework.
For builders, developers, architects, engineers and project managers, this is more than a technical legal change, it has real implications for how risk is allocated and insured.
Here’s what you need to know.
What’s changing?
Under the current joint and several liability model, any one party involved in a building project can be held responsible for the entire cost of defective work, even if other parties contributed to the issue but are unable to pay.
Under the new proportionate liability model, each party will be responsible only for their share of the loss or damage.
This reform is designed to:
- Improve fairness in how liability is allocated
- Reduce disproportionate financial exposure
- Strengthen accountability across the sector
You can read the full Government announcement via MBIE here:
www.mbie.govt.nz/about/news/new-liability-rules-for-the-construction-sector-to-improve-consumer-protection
What is proportionate liability (in plain English)?
In simple terms:
If multiple parties are involved in a project and something goes wrong, each party will only be responsible for the percentage of fault attributed to them.
This is a shift away from scenarios where one solvent party (often the one with insurance) bears the full financial burden if others cannot meet their obligations.
While this reduces unfair exposure for some, it also increases the importance of:
- Clear contracts
- Defined scopes of responsibility
- Adequate professional indemnity and liability cover
Additional protections being introduced
Alongside the move to proportionate liability, the Government is introducing further safeguards:
Mandatory home warranties
Most new residential builds and major renovations will require mandatory home warranties, providing additional protection for homeowners.
Professional indemnity requirements
Design professionals such as architects and engineers will be required to hold professional indemnity insurance.
These measures aim to:
- Improve consumer confidence
- Strengthen professional accountability
- Ensure financial backing exists if issues arise
Who is most affected?
These changes will directly impact:
- Builders
- Residential developers
- Architects
- Engineers
- Design consultants
- Project managers
Even subcontractors may see indirect impacts through contract structures and risk transfer clauses.
If you operate within the construction sector, it’s important to understand how your exposure may shift under the new framework.
What this means for your insurance programme
The move to proportionate liability does not remove risk, it redistributes it.
Now is a sensible time to review:
- Public Liability cover limits
- Professional Indemnity policy wording and limits
- Contractual liability clauses
- Run-off cover (where applicable)
- Alignment between contractual obligations and insurance protection
Many construction businesses assume their current cover will respond in the same way it has historically. With structural regulatory change, that assumption should be tested.
What should you do now?
As these reforms are rolled out this year, consider:
- Reviewing your current liability structure
- Checking professional indemnity requirements (if applicable)
- Ensuring contract terms reflect insurable risk
- Speaking with an adviser about potential gaps
Early review is far easier (and less stressful) than responding after a claim arises.
How HTL can help
At HTL Group, we work with a range of commercial clients across Taranaki and beyond, including businesses operating in construction and related sectors.
Regulatory shifts like this are a reminder that insurance should evolve alongside the legal environment.
If you’d like to discuss how these changes could impact your business, we’re happy to have a conversation and review your current liability programme.
Contact our team here: www.thehtlgroup.co.nz/contact
