For most occupations, you would expect to need insurance cover only while you’re still trading. Once you retire or your business closes its doors, most of us believe there is no need for ongoing insurance cover, as your business is no longer operating and would have no tangible company assets or ongoing exposures. However, quite the opposite is often true, and for builders in particular.

While you may no longer have active job sites to cover whilst under construction, or work vehicles, tools, or even an office to insure, you have a real and significant exposure to product liability claims that can arise down the track. Liability insurance is written under a condition called “occurrence basis” which effectively means that the policy responds only if in place when the incident occurred. For public liability claims this is fine; for example, if a subcontractor injures themself on your job site, and this is only initially reported as a minor incident, but years later you receive notification that the injury was more severe than originally thought, your liability policy that was current when the incident occurred would cover you, even if the claim arose several years later, because you had a policy in place when the incident occurred.

Unfortunately, what many builders don’t consider is their ongoing product liability exposure. Anything you’ve constructed has the potential to lead to an injury or financial loss at a later point in time, and if you do not have a current liability policy in place when that incident occurs, you won’t have cover for the loss should you be found negligent. An easy example to relate to would be in the context of a backyard deck. Consider the following scenario: you have built a deck, and a few years later it collapses, resulting in the injury of a few people. If the subsequent investigation found that you did not construct the deck properly, resulting in the collapse and injuries for which you were liable, you would have insurance cover if you still had a liability policy in place. Water damage is another example of something that can arise well after construction has been completed. If the damage was a result of the build, through insufficient waterproofing or sealing, you could be notified of the costly problem several years after works were completed. If you cease trading and don’t obtain ongoing cover, you would likely be pursued for these losses.

A simple and very cost effective solution is to obtain a ‘run-off’ Liability policy when you retire or cease trading. The team here at MBAIS can source the best option for you, and ensure that any future issues that arise from your completed works won’t affect you financially down the track. While product liability claims are infrequent, when they arise they are often very costly.

For those who are at the other end of their building career, we often receive requests from newer builders to insure the construction works and liability cover on a job-by-job basis, as they’re just starting out, and may only do a few jobs each year. In most cases it’s more cost effective for us to arrange an annual construction and liability cover, which provides cover for all work done over the year. Importantly, obtaining single project cover does not include any product liability cover, whereas the annual policy provides this cover, along with several other benefits.

MBAIS is a not-for-profit insurance brokerage specialising in providing insurance solutions for the building industry. Whether you’re just starting out, winding down, or charging ahead with running a building business of any size, if you’d like to discuss how to best protect your balance sheet and business, please contact the insurance team on (03) 9411 4555.