Contract works compared with liability cover
What it means
Contract works insurance covers the thing being built. If the partly finished structure, the materials on site or the works in progress are damaged or stolen, contract works responds.
Liability insurance covers what the work does to other people and their property. If the work injures someone or damages something belonging to a third party, liability responds.
They answer different questions, and a job can easily need both. Neither one covers faulty workmanship as such: rectifying defective work is a cost of doing the job, not an insured loss, although damage that defective work causes to other property may be.
Also called: contract works vs liability, material damage vs liability
Where you meet it
- Construction contract insurance clauses, which usually require both classes with separate limits.
- Statutory building schemes, which sit on top of both and protect the homeowner rather than the builder.
- Renovation and extension work, where the existing structure needs a specific mention to be covered at all.
Worked example
A storm damages a partly built extension and also blows debris into a neighbour’s car.
The damage to the extension is a contract works question. The damage to the neighbour’s car is a public liability question. One event, two policies, two claims, two excesses. If the builder held only liability cover, the extension itself would be uninsured.
What goes wrong with it
- Existing structures on a renovation site are often excluded from contract works unless specifically included.
- Who insures the works is a contract term. On some jobs the principal insures them; a contractor buying its own cover for the same works can create a double insurance argument.
- Statutory scheme cover is not a substitute for either. It protects the homeowner against the builder failing, not the builder against loss.
- Contract works cover ends when the works are handed over or the policy period expires, whichever comes first. Work that runs long needs the period extended, and an extension arranged after damage occurs is too late.
- Materials not yet on site are often treated separately from the works themselves. Goods in transit and goods stored off site are usually their own sections with their own limits.
Covers this clause appears in
- Contract works insurance — Cover for the works under construction, materials and sometimes existing structures for the duration of a contract.
- Public liability insurance — Cover for legal liability to third parties for personal injury or property damage arising from business activities.
Related clauses
Guides that use this
Sources
On any specific policy, the wording and the schedule govern — they are the primary source for what a clause means there. The references below are general guidance to check against, cited at the publisher level.
- Moneysmart (ASIC) — General guidance on the types of business insurance from the regulator’s consumer site.