Insurers not directly joined to proceedings for claimed defective plumbing work

date

22 May 2026

In issue

Whether the Court of Appeal should overturn a decision of the County Court to refuse to directly join the respondents’ insurers to a proceeding seeking damages for allegedly defective plumbing works carried out by the respondents, and whether there was any error in the trial judge’s interpretation of the relevant Ministerial Order.

The background

Cathy O’Connell (Ms O’Connell) was the owner of two properties in Windsor, 11 Lincoln Place and 14 Mary Street (the properties) and engaged Lentelle Pty Ltd (the builder) to perform works at the properties.

In late 2022, Ms O'Connell commenced proceedings in the County Court of Victoria against the builder, alleging several breaches of the relevant building contracts, including defects in the work. During the proceeding, there was consensus between the experts that a substantial amount of the defects was the result of underground plumbing works.

In August 2023, the builder joined Nix Plumbing (Nix) and JD Fenton Plumbing and Drainage Pty Ltd (JDF) as third parties to the proceeding, as they had each carried out plumbing work on one of the properties.

In May 2024, the builder was placed into liquidation, and the proceedings against it were stayed under the Corporations Act 2001 (Cth). Ms O'Connell received the maximum payout from the domestic building insurer for her claims against the builder.

Ms O’Connell subsequently made an application to bring claims directly against Nix and JDF, with the inclusion of a third plumber, Ward Trevaskis (Trevaskis) who was alleged to have supervised the works of JDF and issued a certificate of compliance for one of the properties.

Ms O’Connell later asserted that, in July 2023, she asked Nix, JDF and Trevaskis (together the plumbers) to claim on their insurance policies, and that they refused to do so. She subsequently asserted that, as a result, she became entitled (under a clause of the relevant Ministerial Order) to make a claim directly against each of the plumbers’ insurers (the insurers). Ms O’Connell subsequently sought to join the insurers to the proceedings directly.

Importantly, Nix, JDF and Travaskis had all previously lodged claims with the insurers. Nix and JDF’s insurers had granted indemnity. Travaskis’ insurer had declined cover.

The Ministerial Order (MO)

The Minister for Planning’s ministerial order entitled ‘Licensed Plumbers General Insurance Order 2002’ (the MO) requires Victorian plumbers to hold insurance cover in specified categories to be eligible for licensing under the Building Act 1993. Schedule 2 of the MO outlines the mandatory provisions that must be included within the insurance policy. Clause 9 of the MO sets out the circumstances where the claimant may bring a claim directly against the insurer for indemnity under the policy, which relevantly includes when a plumber refuses to make a claim.

Clause 9 of Schedule 2 of the MO provides:

that a person who is entitled to claim against you in respect of any liability for which you are indemnified under this policy may enforce this policy directly against us for the person's own benefit if -
1. any event under clause 11 of the Ministerial Order occurs; or
2. you refuse to make a claim against us; or
3. there is an irretrievable breakdown of communication between you and us; and
that for the purpose of that enforcement the person has the same rights and entitlements as you would have had under any legislation applicable to you; and
that we will pay to the person the full amount of any liability for which you are indemnified under this policy despite any failure by you to pay any excess that you are required to pay.

The decision at trial – County Court

The County Court heard Ms O’Connell’s interlocutory application for joinder of the insurers in February 2025. One issue the Court focused on was whether Ms O’Connell was entitled to bring direct claims against the insurers under the MO.

Ms O’Connell alleged the insurers sold ‘junk insurance’ and refused to pay her what she claimed. She also alleged they ‘illegally’ capped their policies and wrongly denied cover to her on the basis Trevaskis was not indemnified.

The Court conversely found Ms O’Connell had fundamentally misinterpreted the MO as well as the nature of policies and cover provided by the insurers.

The Court dismissed Ms O’Connell’s application for joinder on the basis that it did not have a real prospect of success.

The decision at appeal

Ms O’Connell appealed the Court’s decision to the Court of Appeal. She submitted several grounds for appeal, including that:

the Judge erred in her interpretation of the MO and consideration of whether Ms O’Connell had an arguable claim against the insurers directly arising under the MO, and
the Judge erred in her conclusion that there was no arguable claim against the insurers because Ms O’Connell did not have an arguable claim against the plumbers.

In April 2026, the Court of Appeal delivered its judgment, holding that the Trial Judge did not make any error in her interpretation of the MO and that Ms O’Connell had been unable to establish the liability of the plumbers, and therefore she could not enliven the clauses in the MO. Key findings of the Court of Appeal included, in precis:

the MO requires plumbers to hold insurance policies to cover specific liabilities, however even if those policies fail to comply with the MO, this will not immediately give rise to any enforceable rights as between claimants and insurers directly
the insurers' liability is contingent on the plumbers being found liable for the allegedly defective work. Ms O'Connell must first establish the plumbers' liability at trial before any insurance claims can be enforced, and
the insurance policies were not 'junk insurance' as they complied with the MO's requirements, including the minimum indemnity limits.

‘Refusal triggers’ for claimants enforcing directly against insurers

The Court of Appeal helpfully set out its consideration of Clause 9 of Schedule 2 of the MO as follows:

in the event that a plumber is liable for damage caused to a claimant, at least a certain level of funds is available to meet that liability. Within that overall scheme, the purpose of clause 9 of Schedule 2 is to ensure that a claimant is not denied access to those funds by a plumber’s refusal to claim upon the mandatory insurance. That context suggests that the ‘refusal’ contemplated in order to enliven the right to make a direct claim against the insurer is not a plumber’s refusal to make a claim for cover, the right to which would crystalise only if liability is later established, but rather refusal to enforce the indemnity that arises once the plumber has actually been found liable for causing loss of a kind covered by the policy.

Implications for insurers

The appeal decision provides clarity on the interpretation of Clause 9 in Schedule 2 of the MO regarding the circumstances in which claimants can enforce a policy of insurance directly against insurers. Insurers who are the subject of direct claims under the MO ought to closely consider whether the claimant is entitled to do so.

O'Connell v Lentelle Pty Ltd (in liq) [2026] VSCA 76 (29 April 2026)

get in touch

Jacqueline Paterson

Special Counsel

author

Rebecca Wicken