Public liability insurance: what it covers and who carries it

What the policy actually responds to

The trigger is legal liability to a third party, not fault as a moral matter and not a customer being unhappy. Somebody outside the business suffers personal injury or property damage, the business is legally responsible, and the policy stands behind that responsibility up to its limit.

Defence costs sit alongside the compensation. An allegation that turns out to be unfounded still costs money to answer, and that is one of the quiet reasons the cover exists.

• A visitor injured on premises the business occupies
• Damage caused to a client’s building while working in it
• Damage to neighbouring property caused by the work
• Legal costs of defending the claim, whether or not it succeeds

What it does not cover, and what does

The exclusions are where most misunderstanding lives. Public liability does not repair the business’s own property, does not pay for injuries to its own workers, and does not pay to redo work that was done badly.

Each of those has its own home. Workers are covered by the state workers compensation scheme. Own property sits in a business pack or property policy. Defective workmanship is usually the contractor’s own cost, and where advice rather than work is the failure, professional indemnity is the cover that responds.

• Injury to the business’s own workers — workers compensation
• Damage to the business’s own tools, stock or premises — property cover
• The cost of redoing faulty work — usually uninsured
• Losses caused by faulty advice or design — professional indemnity

What people get wrong about it

The most common wrong belief is that holding public liability makes a business compliant. In most trades it is a contract requirement or a licence condition in particular states, not a general legal obligation, and the site tracks which states attach a condition to which licence.

The second is that the limit on the certificate is a pot of money the business owns. It is a maximum the insurer will pay for a claim, and on some policies for all claims in the period combined. Which of those applies is a matter of reading the schedule.

The third is that public liability covers the work itself. It does not. A contract that has been performed badly is a contractual problem, and the policy is looking at what the work damaged, not at the work.

Where the arguments happen at claim time

Disputes cluster around whether the activity that caused the loss falls inside the business description on the schedule. A business described as doing one thing and found doing another is the single most common reason a liability claim runs into trouble.

The other recurring argument is timing on projects with several parties: whose policy responds when a head contractor, a subcontractor and a principal are all involved, which is what the interested party and cross liability clauses exist to settle.

Questions

Is public liability insurance compulsory in Australia?

There is no single national law requiring every business to hold it. It becomes compulsory in practice through contracts, licence conditions in some states and occupations, and the terms landlords, principals and event organisers impose. The occupation and state pages on this site track which licences carry a condition and which do not.

Does public liability cover my tools?

No. Tools belong to the business, and the policy responds to damage to property belonging to somebody else. Tools of trade cover is the separate class written for that.

Does it cover my employees if they are hurt?

No. Injuries to workers are handled by the workers compensation scheme in the state where they work, which is compulsory and bought through the scheme rather than on the open market.

What is the difference between public liability and products liability?

Public liability responds to injury or damage arising from the business’s activities. Products liability responds to injury or damage caused by goods the business sold, supplied or installed after they have left its hands. The two are commonly written together on one policy.

Clauses that turn up in this cover

• Certificate of currency — A one-page confirmation from an insurer or broker that a policy is in force, showing the insured, the policy type, the period of cover and the limit.
• Certificate of insurance — A summary document confirming cover exists, sometimes issued in place of a certificate of currency and sometimes meaning something narrower.
• Principal’s indemnity — An extension treating the principal to a contract as an insured for liability arising from the contractor’s work.
• Waiver of subrogation — A clause under which the insurer gives up its right to recover from a named party after paying a claim.
• Cross liability clause — A clause treating each insured under a policy as though it held a separate policy, so one insured can claim against another.
• Limit of indemnity per occurrence — The maximum payable for any one event, the figure most contracts and licences refer to.
• Excess or deductible — The amount the insured bears before the insurer pays, sometimes varying by claim type.
• Occurrence basis — A policy that responds to events that happen during the period of insurance, regardless of when the claim is made.
• Contract works compared with liability cover — The distinction between insuring the work itself and insuring liability to others for damage caused by the work.
• Subcontractor insurance warranty — A policy condition requiring subcontractors to hold their own cover, and the effect if they do not.

Occupations that commonly carry it

Ordered by how central this cover is to each occupation in the graph. A pattern in the data, not a statement that any business is required to hold it.

• Electricians — Licensed electrical work, from domestic fit-outs to commercial and industrial installation.
• Plumbers — Licensed plumbing, drainage and gas-fitting work across domestic and commercial sites.
• Carpenters — Structural and finish carpentry, framing, formwork and fit-out.
• Builders — Licensed building work as principal contractor on residential or commercial projects.
• Handypersons — General maintenance and repair work below the licensing thresholds of the specialist trades.
• Commercial cleaners — Contract cleaning of offices, strata common property, construction sites and end-of-lease work.
• Roofers — Roof installation, restoration and plumbing-adjacent roof drainage work at height.
• Painters — Interior and exterior painting and decorating, domestic and commercial.
• Tilers — Wall and floor tiling, waterproofing-adjacent work in wet areas.
• Landscapers — Hard and soft landscape construction, including retaining, paving and irrigation.
• Gardeners — Grounds maintenance, mowing and garden care for domestic, strata and commercial clients.
• Concreters — Formwork, placement and finishing of concrete slabs, driveways and structural elements.
• Scaffolders — Erection, alteration and dismantling of scaffolding, a high-risk licensed activity.
• Welders — Structural and fabrication welding, including hot work on site.
• Solar installers — Design and installation of photovoltaic and battery systems, an accredited electrical specialisation.
• HVAC technicians — Installation and servicing of heating, ventilation, air conditioning and refrigeration plant.
• Earthmoving contractors — Excavation, bulk earthworks and site preparation using mobile plant.
• Demolition contractors — Licensed demolition and strip-out, including work adjacent to hazardous materials.
• Arborists — Tree assessment, pruning and removal, frequently near structures and services.
• Pest control technicians — Licensed application of pesticides and termite management for domestic and commercial property.
• Bricklayers — Brick, block and masonry walling for residential and commercial structures.
• Plasterers — Wall and ceiling lining, cornice, rendering and set finishing.
• Glaziers — Supply and installation of glass in windows, doors, shopfronts and balustrades.
• Waterproofers — Membrane and tanking work to wet areas, balconies, roofs and below-ground structures.
• Stonemasons — Cutting, dressing and installing natural and engineered stone, including benchtops and cladding.
• Cabinet makers — Manufacture and installation of joinery, cabinetry and built-in furniture.
• Shopfitters — Fit-out of retail and commercial tenancies, usually working to a landlord’s conditions.
• Flooring installers — Laying timber, vinyl, laminate and carpet in domestic and commercial spaces.
• Insulation installers — Installation of thermal and acoustic insulation in roofs, walls and subfloors.
• Fencing contractors — Boundary, security, pool and rural fencing, including gates and automation.
• Paving contractors — Laying pavers, kerbs and hard surfaces for driveways, paths and public areas.
• Asphalt contractors — Surfacing and resurfacing of roads, car parks and driveways with hot-mix and bitumen.
• Civil contractors — Roads, drainage, subdivisions and utilities work, usually under principal-supplied contracts.
• Steel fixers — Placing and tying reinforcement before concrete pours.
• Structural steel erectors — Erection of structural steel frames, portal frames and mezzanines.
• Riggers — High-risk licensed rigging and dogging work supporting lifts and structural erection.
• Crane operators — Operation and hire of mobile and tower cranes, usually with an operator supplied.
• Formworkers — Construction and stripping of formwork for suspended slabs, walls and columns.
• Concrete pumpers — Placement of concrete by boom and line pump, operating over occupied sites.
• Asbestos removalists — Licensed removal and disposal of asbestos-containing material.
• Traffic controllers — Traffic management and control at roadworks and site accesses.
• Line markers — Marking of roads, car parks and sports surfaces.
• Locksmiths — Installation, repair and opening of locks and access hardware, including after-hours callouts.
• Security system installers — Installation and maintenance of alarms, cameras and access control.
• Antenna installers — Installation and tuning of television antennas and reception equipment, mostly at height.
• Garage door installers — Supply, installation and servicing of garage and roller doors and their motors.
• Swimming pool builders — Construction of in-ground and above-ground pools, including barriers and certification.
• Deck builders — Construction of timber and composite decks, pergolas and outdoor structures.
• Shed builders — Supply and erection of steel sheds, garages and rural buildings.
• Kitchen installers — Removal and installation of kitchens, coordinating trades in an occupied home.
• Bathroom renovators — Bathroom strip-out and rebuild, combining waterproofing, tiling and plumbing trades.
• Window installers — Supply and installation of windows and doors in new and existing openings.
• Fire protection technicians — Installation, testing and certification of fire detection and suppression systems.
• Lift technicians — Installation and maintenance of lifts, escalators and access equipment.
• Signwriters — Design, fabrication and installation of signage, often at height or on shopfronts.
• Scaffold hire operators — Hire of scaffolding and temporary access equipment, with or without erection.
• Equipment hire operators — Dry and wet hire of tools, plant and access equipment to trades and the public.
• Skip bin operators — Delivery and collection of waste bins to domestic and commercial sites.
• Waste contractors — Collection, transfer and disposal of commercial and construction waste.
• Carpet cleaners — Steam and dry cleaning of carpets and upholstery in homes and commercial premises.

How it is evidenced

• Certificate of currency

Sources

• Moneysmart (ASIC) — General guidance on business insurance from the regulator’s consumer site. A starting point, not a definition of this cover.
• Insurance Contracts Act 1984 (Cth) — Federal Register of Legislation — The statute governing how insurance contracts operate in Australia, including the duty owed when taking out cover.