How do Public Liability policies work?

The trigger for a policy to respond to damage is that you or your business must be negligent for the damage or injury. This is where the phrase ‘act of god’ comes from as you wouldn’t want to pay for  damage that is completely outside of your control, but if you or your business is the reason it occurred you would probably be happy to pay, or at least for your insurance company to pay.

The ultimate decision as to whether you have been negligent is decided in a court of law. Whilst most Public Liability claims don’t go this far, ultimately the insurance company will consider whether a court of law would be likely to find you negligent. If they think it would, then they will look to settle the claim with the other person or business on your behalf.


What happens when a Public Liability claim is lodged?

Public Liability claims can be complicated. Firstly, the question of negligence has to be dealt with and secondly, what is the value of the damage or injury?

Damage to property is normally easy to value as it will be the cost of replacing or repairing the property, but injury is much more difficult to value – particularly if someone has suffered permanent injuries.

In the event you need to make a Public Liability claim, it is best not to admit fault and leave it for the insurance company to investigate and act on your behalf.


Will Public Liability cover my advice?

Public Liability does not cover professional advice. This is because professional advice is insured by a different type of policy called Professional Indemnity. Tradesman give advice, but usually you are not being paid specifically for that advice, the payment will be for your overall service. For most tradesman, their advice will be covered under a good Public Liability policy, however if you have specialist knowledge or skills and charge specifically for this then it is likely you will need a Professional Indemnity policy.


How much Public Liability cover do I need?

The cost of Public Liability claims can be significant in the worst case that someone is permanently injured or even killed. The most common level of insurance now is $20 million, however lower limits are available. Larger companies are now looking at $50 million Public Liability limits. These may seem very large figures, but keep in mind that a claim may not happen for years after the actual work is completed and can sometimes take many years to settle. In large claims there will be significant legal fees that will need to be factored in as well.


What is the Public Liability claims process at Trades Insurance?

At Trades Insurance, we are acting on your behalf to achieve the best outcome using our insurance expertise. We will assist you to lodge the claim using our simple and clear claim lodgment process.

We will provide you with the claim number and advise you if the insurer decides to appoint a loss adjustor or requires further information. We will maintain contact with the insurer to ensure that your claim is receiving the required attention and provide you with regular updates.

For more information on our claims process, or to lodge a claim, please visit our Claims page.


Will sub-contractors be covered under my Public Liability insurance?

Trades and construction businesses often use sub-contractors to undertake activities on their behalf. This may be required for a specialist activity (such as erection of scaffolding), as a result of unplanned increased workload, or simply a preference to use a sub-contracted workforce.

Sub-contractors are not normally insured under a Public Liability policy, so it’s good business practice to get confirmation that any subcontractors being used have adequate insurance themselves. This is achieved by obtaining a certificate of currency, a copy of which should be kept on file. Where a sub-contractor is being used for a particular contract, or working for you for an extended period, it’s also a good idea for you to be named as a Principal under the sub-contractor’s Public Liability insurance. This way if the sub-contractor is responsible for a claim, it’ll be made under their policy without the need for you to claim on your own policy.

If a sub-contractor doesn’t have insurance in place, or you just want to provide the insurance for your sub-contractors, then it can normally be arranged. You will need to name the sub-contractors on your policy and will likely be charged an additional premium for them.


What are worker to worker claims?

Worker to worker claims relate to injuries to labour hire staff, contractors, sub-contractors or employees of any contractors or sub-contractors who are doing work for or on behalf of your business. You owe a duty care for the health and safety of these workers.

A greater duty of care attaches to labour hire staff as they operate totally under your instruction and supervision. Sub-contractors and their workers are considered more responsible for their own health and safety, but you still have a duty of care to them.

Workers’ Compensation is run differently in each state, but typically the injured worker will claim from their employer’s Workers Compensation insurer. The Workers Compensation insurer will investigate the circumstances of the claim and if the injury may have been contributed to by your business, they will seek to recover the costs from your Public Liability insurer.

Worker to worker claims can take many years to settle and often incur a substantial cost.


If I have signed any contracts relating to my work, will I be covered under Public Liability?

No. Public Liability policies nearly always exclude contractual liability. This is because contractual agreements usually ask you to sign away rights that would otherwise protect you when something goes wrong.

If you have a large contract, it can be possible to get the insurer to agree to include the contractual liability in the policy, but you will need to provide them with the contract and have it noted on your policy. There will likely be an extra premium charged by the insurer to do this.

Another option if you are signing contracts with unfair terms is to negotiate changes to any unfair contract terms, to make sure they are balanced equally in yours and the principal’s favour. This reduces the risk of any uninsured claims, but obviously needs to be done before you agree to the contract.

A good insurance broker will provide you with access to a contract review legal service that can point out where a contract may be unfair for you.


What is Principal’s Indemnity?

Often in construction projects, the project principal will require to be named on each contractor’s insurance policy. It is not ideal to note them as a joint insured on your policy as this may give them more rights than intended, so a Principal’s Indemnity clause is often used to address this.

The Principals’ Indemnity clause provides cover for the principal as an insured party in respect of their vicarious liability (liability caused by others), but only to the extent required by the contract or agreement and subject to your policy limits, terms and conditions.

If there’s a claim against you or the principal which arises as a result of your act or omission, the principal will be covered under your public liability policy as an insured party.


What is the difference between Public Liability and Professional Indemnity insurances?

Professional Indemnity insurance covers you for the professional advice you give, or an expected duty of care. It is only required where an additional level of care would be expected for the service that you are providing. For most tradesman, if you are not charging for your advice then a Public Liability policy should be sufficient. If you are charging a fee or providing design services then you should consider a Professional Indemnity insurance policy.


What is the difference between Public Liability insurance and General Liability insurance?

General liability is not an insurance term used in Australia, but is common in the US. If you do work for US companies, their contracts may refer to a requirement for General Liability, a Public Liability policy should be sufficient.


What is Products Liability insurance?

Product’s Liability covers injury or damage caused by a product that you sell or supply. In Australia you can be responsible for injury caused by products, even if it is not your product. Most good Public Liability policies will include Products Liability.