Many builders operate their own independent businesses and, as such, take out their own insurance. On any building site however, there can be a multitude of subcontractors in operation at any given time. Each subcontractor should carry their own public liability insurance, to cover claims against them arising from the performance of their work.

Public liability insurance provides protection for amounts the ‘Insured’ (i.e. the parties stated in the policy) may become legally liable to pay for compensation (i.e. damages) in respect of ‘Third Party’ (other persons’) personal injury or property damage, as a result of an occurrence in connection with the business of the insured. The crucial point is that public liability insurance protects only the ‘Insured parties’. Therefore, unless a specific provision is made in the builder’s policy to include subcontractors, a subcontractor will not be covered by the builder’s policy. Similarly, you will be left uninsured if the builder’s insurance policy upon which you were relying, isn’t current and in force.

Adding to potential woes is that, in recent years, governments have introduced a ‘proportionate liability’ regime, whereby the common law rule of ‘solidarity’, or ‘joint and several’ has been applied by the courts, thus enabling an injured party to recover from more than one defendant. Often, liability will be apportioned among all parties involved in the construction works, which is normally the builder, subcontractor, engineer, architect and suppliers. The extent of such liability could range from zero to 100 per cent, depending on the circumstances of the incident giving rise to the claim, and the course taken in any subsequent legal proceedings.

Also, the builder may have you sign a contract that states the subcontractor will cover the builder for any negligence, even if it is the builder’s own negligence that caused the damage to third party property / personal injury.

Here are some possible scenarios:
• A painter causes overspray damage to cars parked near a construction site and no other contractor contributed to the cause. If a liability claim was made against the painter and the damage was 100 per cent attributable to the painter, the painter’s policy would cover 100 per cent of the amount of damages.

• A plumber excavates a trench and leaves it open, without adequate barriers. Another person on site falls into the excavation and is injured. This could result in legal proceedings against the plumber for unsafe work practices, the builder for being in control of an unsafe workplace, or both. If each contractor is insured, the plumber’s insurer and/or the builder’s insurer would defend any claim on behalf of their respective clients. Liability could be apportioned evenly (50/50) and each insurer would subsequently pay their amount. Such resolution could be the culmination of court proceedings, pre-trial agreement, negotiation, mediation or other avenues. However, if the plumber is not insured, the amount of liability incurred for their share and associated defence or other costs would have to be met from the plumber’s own funds. When you consider that personal injury claims often run into the millions of dollars, it doesn’t make sense for subcontractors to expose themselves to the risk of losing their business or all of their personal assets by not carrying the appropriate insurance coverage.

For builders, it’s important to ensure your subcontractors have adequate insurance, as without the right cover in place, you, the subcontractor and your clients are likely to be disadvantaged in the event of an incident. As the principal builder onsite, you will likely be held partially liable for the negligence of your subcontractors, and be brought into any subsequent claims. Through ensuring your subcontractors have public liability insurance, you will reduce claims on your own insurance program, helping you to minimise premiums and future costs to your business.

If you’d like to know more about public liability insurance, please contact the team at MBA Insurance Services on (03) 9411 4555