While Australians have recently had to manage dangerous bushfires, urban areas are also facing fire issues. The findings of the Victorian Building Authority’s (VBA) audit of external wall cladding may have a profound impact on insurers in Australia, as noncompliance issues with aluminium composite panels (ACP) were found in alarming numbers.

ACPs and the Lacrosse Docklands fire

The test on the Lacrosse Docklands ACPs was terminated early due to excessive flames and smoke.

The VBA audit was spurred by the Lacrosse Docklands fire of November 25, 2014, a high-rise apartment fire that spread much more quickly than expected and in an unpredictable way. According to the Metropolitan Fire and Emergency Services Board’s (MFB) Post Incident Analysis Report, the fire travelled mainly up the building’s exterior; six levels were in flames when firefighters arrived on the scene, but the fire reached the roof of the 21-storey building just six minutes later.

The MFB report concluded that the fire’s rapid spread was caused in large part by the use of ACPs as part of the building’s facade.

ACPs are panels comprised of two sheets of aluminium with a filler material, such as polyurethane, in between them. In the case of the Lacrosse Docklands building, the ACPs used a polyethylene filling and were deemed combustible after being tested.

Normally, five samples of a material are tested, but the test on the Lacrosse Docklands ACPs was terminated early due to excessive flames and smoke and to avoid damaging the testing equipment.

While ACPs are permitted for external facades in certain circumstances, the VBA audit found a noncompliance rate of 51 per cent. An industry alert released by the VBA indicated that a number of factors could result in noncompliance, such as the use of one brand of ACP over another or the way ACPs were incorporated into a building’s design.

The issue with noncompliance and ACPs presents particular concerns for insurers who could find themselves covering risky buildings. This is of particular interest in regard to landlord protection insurance as well as insurance covering the professionals behind a building’s development, construction and management.

“Brokers have to be conscious of the fact that either the product used, or the installation of the product, may give rise to a particular risk that the insurer may need to know about,” said Mark Sheller, a partner with Tresscox Lawyers, in an Insurance and Risk article.

As the risk of noncompliance with ACPs is not just limited to Melbourne, insurers across Australia should make sure they have a plan of action regarding these risky facades when it comes to both new and existing policies.