Why You Should Ensure Your Sub-Contractors Have Their Own Public Liability Insurance in Place

On every project, no matter what reasonable precautions are put into place, there is always the possibility of damage to the building site or third party properties or personal injury to other parties (including other sub-contractors) caused by your sub-contractors or their employees. As the principal builder you are responsible for all facets of the project including a responsibility to insure the works. Under your contract with the client, you can be held vicariously liable for such events caused by your sub-contractors – even when you have had no involvement in what occurred.

A public liability policy provides valuable cover to you by insuring your legal liability to pay compensation for any personal injury or property damage to a third party which may arise from the contract works. Whilst the importance of maintaining your own liability policy is recognized by most builders, the importance of ensuring and sighting evidence that your sub-contractors also maintain their own liability policy seems to be not as appreciated. Whether it be due to a lack of understanding or due to employing tradesmen with whom you have known and worked with for years, it is equally important to ensure they too maintain their own liability policy.

Why should you bother?

There are four reasons why:-

    1. Many Construction policies will exclude cover where the damage or injury is caused by a sub-contractor and you have told the insurer that you check for their liability insurance but somehow failed to do this; This will leave you uninsured.
    2. Any claim against your policy will impact upon your future insurance premiums. If you can reduce the impact of such claims through a recovery against the sub-contractors policy this will save you considerable premium increases and in extreme cases allow you to continue to secure the insurance;
    3. Should your insurer be required to pay a claim on your policy they will seek recovery from your sub-contractor and if they do not have insurance cause them significant financial harm. If you have a long relationship with the sub-contractor this could be problematic for you;
    4. Should an employee of another contractor/sub-contractor onsite be injured as a result of the actions of one of your sub-contractors their workers compensation insurer will seek recovery of the workers compensation claim from you. This is one of the major types of claims under this insurance. Such claims generally have an excess under your policy of many thousands of dollars for what is termed "worker to worker" claims. You will have to pay this excess.

As the principal builder on site, should an incident arise it is your responsibility to establish the existence of those policies that your insurer can seek recovery against. The easiest way to do this is by requesting a copy of your sub-contractors current public liability certificate of currency before they commence work onsite.

Alternatively, if you regularly use the same sub-contractors, just ask them for a certificate of currency each year when their policy expires. This should form part of your standard business practices.

As the principal builder onsite you will be held liable for their negligence and your own policy should respond to the matter. Furthermore, any claims made under your policy will contribute towards your personal claims history. Depending on the severity of the circumstances and the frequency of claims this will have a significant impact on your future premiums; the possibility of increased excesses or restrictive conditions placed on your policy or perhaps your ability to secure the insurance on renewal.

When you are working as a sub-contractor for another builder not all liability policies are the same and without a thorough review of the principal builder's policy you cannot be certain that cover will extend to include your activity. Additionally, even if the principal builder's insurer does settle a claim arising from you negligence, there may be nothing preventing their insurer from seeking recovery of claims costs from you personally. Consequently by relying on the principals own insurance you are potentially leaving yourself financially exposed.

Under any insurance contract you have a Duty of Disclosure and are requested to answer several questions to secure the insurance at competitive pricing. If you answer those questions incorrectly the insurer is entitled to either deny the claim outright (if your answer is deemed fraudulent or deliberately misleading) or they can reduce their liability to pay the claim by the extent to which they are prejudiced – in most cases to $Nil!

It is therefore not only extremely important but also extremely beneficial that you seek out evidence that your sub-contractors carry their own liability insurance.

For more information please contact us on 1800 077 933.

 
 

BOVILL RISK & INSURANCE CONSULTANTS

Specialist Insurance Brokers