The Role of Public Liability Insurance for Builders

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Owning a construction business means you have your hands full. Whether you’re a builder or a sub-contractor there’s a lot to oversee, do and manage.

And then there’s the risk of a third-party being injured or their property damaged due to your work. That’s where public liability insurance comes in to protect your business. It’s the most common type of cover for builders, tradies and most other contractors.

What does public liability insurance cover?

Typically, a policy protects you against legal liability for third-party personal injury or property damage related to your business operations. A third party can be a contractor, visitor, supplier or member of the public. That coverage usually extends to your legal costs and expenses in defending claims against you.

Public liability policies can cover contractual obligations, contract principals, and fixed and mobile plant items.

However, it won’t cover you or your property. You can’t be legally liable for injuring yourself or causing damages to your property. It’s also unlikely to cover design works.

Here’s how public liability policies can vary:

They’re either for a specific project or can cover all your projects over 12 months, based on your annual turnover
Types of works tend to be limited by construction period, scope, location or maximum project values
Dollar value coverage for liability, such as $5M, $10M or $20M, are typical
You can automatically extend your policy to cover your liabilities to subcontractors and their workers (you’ll probably still need workers’ compensation, though, so check with your relevant authority)
Depending on the sorts of risks your business is exposed to
Options include off-site operations such as your sales office, storage, display, workshop, etc.
Special provisions such as for dilapidation or conditions reports, or vibrations from your works damaging adjacent buildings
Choice of paying a monthly or annual premium.

Do both builders and subcontractors need public liability insurance?

Work out who is covered by a public liability insurance policy. It will only protect those it defines as the insured parties. Usually, it’s the business nominated, plus its directors, partners and employees, while acting on that company’s behalf.

Each business working on a project needs its own public liability insurance, which covers for claims due to their negligence, acts or omissions. It’s not about overlap, but apportioning the percentage of liability for damage or injury.

For instance, if a painter’s overspray damages nearby cars, they could be 100% liable and would pay the total damage amount.

But, just say a plumber digs a trench, leaves it without a barricade, and someone falls in and is injured. That plumber isn’t solely liable. They potentially face legal action for inadequate work practices. Meanwhile, the builder would be sued for having an unsafe workplace, or both. The plumber’s and the builder’s insurers could split the costs.

Effectively, a subcontractor runs their own business even if they’re working under a hiring contractor or contracted to a company. They are still responsible for their actions – and liabilities - while performing their work.

Is it the same as contract works’ insurance?

Sometimes, a public liability policy will be part of your contract works insurance, but it’s best not to assume. Contract works cover, also called builders all risk insurance, protects your projects from risks such as:

Fire, storm or other named risks causing loss or damage
Materials lost or damaged on your work site
Property damage or personal injury to others.

Now’s a good time to check your construction insurance is up to date. Contact us so we can guide you on what your policy covers to ensure it suits your current business circumstances.