Implications of Star Casino's Cladding Case for Construction Insurers

Between 2014 and 2016, The Star Entertainment Sydney Properties initiated refurbishment works that included the installation of ACPs. Subsequently, the casino sought $4 million in damages from Buildcorp Group, alleging issues related to the cladding used. Buildcorp, in turn, pursued claims against the project's architect and Ausrise Aluminium, the subcontractor responsible for installing the panels. Notably, Ausrise was in liquidation, bringing its insurer, Lloyd's Syndicate 1206, into the legal fray.

In February 2026, NSW Supreme Court Judge Kelly Rees delivered a nuanced verdict. For two of the three projects under scrutiny, the court found no grounds for the casino's claims. Specifically, in the first project, the builder had no design responsibility, and in the second, the ACP installation complied with the building code at the time. However, in the third project, the builder was deemed liable, and the court determined that the use of non-compliant ACPs constituted 'property damage' under the insurance policy terms.

Legal experts have highlighted the broader implications of this ruling. The decision reinforces the importance of clear contractual terms and the delineation of design responsibilities in construction projects. For insurers, the case underscores the necessity of precise policy wording, particularly concerning exclusions related to defective workmanship. The ruling suggests that while insurance is designed to cover unforeseen damages, it may not extend to predictable business risks arising from poor construction practices.

Matthew Smith, a partner at Clyde & Co, noted that the case validates traditional policy exclusions concerning defective workmanship. He emphasized that insurance is intended to cover fortuitous events rather than foreseeable business risks, such as substandard construction. Consequently, insurers are likely to continue drafting policies with explicit exclusions and may further refine definitions of what constitutes 'damage' to mitigate potential liabilities.

For construction professionals and insurers alike, this case serves as a pivotal reminder of the importance of meticulous contract management, adherence to building codes, and the need for comprehensive risk assessment strategies. Ensuring clarity in contractual obligations and maintaining rigorous quality control measures are essential steps in mitigating potential legal and financial repercussions in future projects.