Public Liability Insurance is often considered one of the foundations of a tradie's risk management program. However, simply having a policy in place may not be enough. Many tradies only discover gaps in their cover after an incident occurs.
At National Corporate Broking, we regularly help clients identify and address potential exposures before they become major problems. Here are five common mistakes tradies make with their liability cover and practical steps to help avoid them.
Working Outside Your "Business Description"
When you first arranged your insurance, your business may have been described as a carpenter, plumber, electrician or general builder. Over time, many businesses expand their services, take on new types of work or enter different industries.
Insurers generally assess risk based on the information disclosed to them about your business activities. If a claim arises from work that falls outside the activities disclosed to the insurer, this may affect how a claim is assessed.
The Fix:
Whenever your services change significantly or you begin undertaking new types of work, speak with your broker to ensure your policy accurately reflects your current operations.
Assuming Subcontractors Are Automatically Covered
One of the most common misconceptions in the construction industry is that a head contractor's Public Liability policy automatically covers every subcontractor working on site.
Coverage for subcontractors varies between insurers and policy wordings. In many circumstances, subcontractors may need to maintain their own insurance arrangements.
If a subcontractor causes property damage or injury and does not carry appropriate insurance, you may still be drawn into the claim and face additional legal and financial exposure.
The Fix:
Request a current Certificate of Currency from every subcontractor before work commences and maintain records of those certificates. It is also important to confirm they remain current and are renewed as required.
Misunderstanding "Care, Custody, and Control"
Public Liability Insurance is generally designed to respond to damage caused to third-party property. However, many policies contain limitations or sub-limits for property that is in your Care, Custody or Control at the time the damage occurs.
For example, if you are working on a high-end renovation and accidentally damage cabinetry, fixtures or equipment that has been entrusted to you, your standard policy limits may not be sufficient to cover the loss.
The Fix:
Consider whether the Care, Custody and Control limit available under your policy is appropriate for the value of the property and assets you regularly handle.
Ignoring Contractual Liability Obligations
Before signing a commercial contract, government tender or subcontract agreement, pay close attention to any indemnity provisions.
Some contracts may require you to accept responsibilities beyond those that would ordinarily apply under common law. Many insurance policies contain limitations or exclusions relating to liabilities assumed under contract, and cover can vary significantly between insurers and policy wordings.
Signing a contract without understanding these obligations could result in uninsured exposures.
The Fix:
Have your broker review the insurance requirements and indemnity clauses before signing major contracts. This can help identify potential gaps and determine whether any additional cover or endorsements should be considered.
Failing to Report Incidents Promptly
Many tradies hesitate to report incidents because no formal claim has been made, or the situation appears minor at the time.
However, many insurance policies contain notification requirements that may apply when an incident occurs that could reasonably give rise to a future claim.
For example, if a homeowner trips over equipment on site and later alleges an injury, the circumstances surrounding the incident may become important when the claim is investigated.
The Fix:
Maintain records of all incidents, including photographs, witness details and relevant notes. If an incident occurs, contact your broker as soon as practicable so the appropriate notification and reporting requirements can be discussed.
Protecting Your Business Starts with Understanding Your Risks
Public Liability Insurance plays an important role in protecting many Australian trade businesses, but obtaining a policy is only one part of effective risk management.
Ensuring your business activities are accurately disclosed, verifying subcontractor insurance, understanding policy limitations and meeting notification obligations can help reduce the risk of unexpected issues when a claim occurs.
Insurance policy cover, conditions, exclusions, limits and notification obligations vary between insurers and products. You should carefully review your policy documentation and seek professional advice regarding your own circumstances before making any decisions.
If you're unsure whether your current insurance arrangements are appropriate for your business, the team at National Corporate Broking can help you better understand your options and identify potential areas of concern.
Frequently Asked Questions
Do tradies need Public Liability Insurance in Australia?
While Public Liability Insurance is not legally mandatory for all trades, many clients, builders, principal contractors and government projects require evidence of cover before work can commence.
Does Public Liability Insurance cover subcontractors?
Coverage varies between insurers and policy wordings. Subcontractors may require their own insurance arrangements.
What is a Certificate of Currency?
A Certificate of Currency is a document issued by an insurer confirming that a policy is currently in force.
What is Care, Custody and Control insurance?
This generally refers to cover relating to property that has been entrusted to your care while work is being performed, subject to policy terms and limits.
What happens if I do not disclose changes to my business activities?
Failure to accurately disclose business activities may affect how an insurer assesses a claim or determines available cover.
