Subcontractor insurance warranty
What it means
A subcontractor insurance warranty is a policy condition requiring the insured to ensure that subcontractors hold their own insurance, usually liability cover at a stated minimum, before they work.
It shifts a real obligation onto the head contractor. The warranty is part of the policy, so failing to meet it is a breach of the insurance contract itself, not merely a contractual issue with the subcontractor.
Also called: subcontractor warranty, subcontractors condition, subbie insurance clause
Where you meet it
- Liability policies issued to builders and head contractors who subcontract work.
- Endorsements applied where an insurer has priced the risk on the basis that subcontractors carry their own cover.
- Contractor compliance systems, which exist largely to satisfy this condition.
Worked example
A builder engages an uninsured subcontractor, whose work injures a member of the public. The builder’s liability policy carries a subcontractor insurance warranty.
The insurer may reduce or decline its response because the warranty was not met, leaving the builder exposed to the claim it thought was insured. Collecting certificates is not administrative box-ticking; it is how this condition is satisfied.
What goes wrong with it
- The warranty usually requires cover to be current for the whole time the subcontractor is engaged, not just on the day they were onboarded. Expiry dates need tracking.
- A certificate in the wrong entity’s name does not satisfy the warranty, and this is the most common defect in a compliance file.
- Labour hire and sole traders working under direction may be treated as workers, not subcontractors — a workers compensation question with its own consequences.
- Some warranties require a minimum limit as well as the existence of cover. A subcontractor with a policy below the stated figure can leave the condition unmet even though a certificate was collected.
- The obligation runs down the chain. A subcontractor that engages its own subcontractors usually carries the same condition, and a head contractor relying on one layer of certificates may still be exposed at the second.
- Read the condition itself before relying on a summary of it. Insurers word these differently, and some require written evidence to be held on file while others require only that cover exists.
Covers this clause appears in
- 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 business insurance from the regulator’s consumer site. A starting point, not a definition of this clause.
- Safe Work Australia — Source for the duties that sit alongside insurance when engaging contractors.