Does Your Public Liability Insurance Cover Subcontractors? A Guide For Head Contractors

Many Australian industries rely on subcontractors as employees who perform regular duties. In particular, the construction and trade industries deal with high-volume projects that require a large number of employees, so an efficient way to complete their jobs is with subcontractors. 

As a head contractor, you’ll be in charge of navigating the insurance policy and ensuring that your business is protected. A common misconception is that public liability policies cover everyone on the construction site; however, this doesn’t extend to subcontractors.

Your insurance policies will generally cover your errors and your employees’ errors, but subcontractors fall into another bracket. How does this work? Morgan Insurance Brokers, as your experts, will break it down for you.

The Difference Between Employees Vs Subcontractors:

When it comes to insurance policies, terms and conditions are very specific. That’s why it’s important that you understand your coverage and ensure that you’re prepared in the event of a claim. So, what is the difference between an employee and a subcontractor?

• Employee: Employees are protected under your policies because they are a part of your company and business. 
• Subcontractor: Subcontractors are under separate business entities with their own ABNs, which means they are liable for their own work and not covered under your insurance policies.

So, subcontractors are an efficient way to manage workload in high-volume and demanding industries, but they come at a risk, as you’re not protected for their work. Insurers will often ask for the percentage amount of your turnover that is paid to subcontractors, so they can calculate your risk.

Am I Liable For Subcontractors’ Errors?

If a subcontractor causes damage or makes a mistake, they should be directly liable (i.e. through their own insurance). Your insurance policy will view this as third-party negligence, meaning you’re not directly liable but you can still be vicariously liable.

Vicarious Liability: When You May Still Be Responsible

Even though a subcontractor is technically an independent business, you may still be vicariously liable for their actions in certain circumstances. Vicarious liability arises where you are considered responsible for the way the subcontractor was appointed, instructed, or supervised.

Insurers and courts may look at factors such as:

• Instructions given: Did you provide clear and appropriate instructions?

• Scope of control: How much direction or control did you exercise over their work?

• Onboarding process: Did you verify qualifications, experience, and insurance?

• Toolbox talks and safety briefings: Were proper safety procedures communicated?

• Due diligence: Did you hire a competent, qualified, and insured subcontractor?

• Supervision and oversight: Was there reasonable monitoring of their work?

If it’s determined that you failed in your duty of care, for example, by hiring someone unqualified, not checking their insurance, or providing unsafe instructions, your own insurance policy may need to respond and bear a portion of the claim.

Our Advice 

So, as a head contractor, it is your responsibility to ensure that your business is protected. This starts with the insurance policy. But what do you look for? Let’s break it down.

• Disclosure: You should disclose that your business uses subcontractors to your insurer; otherwise, claims could be denied.
• Certificate of Currency: It is important that, before you allow a subcontractor to begin work on your site, you check that they have a current certificate of currency for public liability. This means they have the appropriate insurance to protect their own work.
• Written Agreement: You should have an agreement in place that explicitly states they own insurance and you are not liable. 
• Compliance: It is down to you to ensure compliance is upheld. For example, if a subcontractor tells you they are renewing their insurance ‘next week’, you should wait until they have obtained it to let them on your site. 

The truth is, when it comes to insurance policies, there is a lot to look for, and it can be easy to miss vital information. With Morgan Insurance by your side, you don’t need to worry about whether you’ve covered all the bases. We’ll navigate the insurance market for you to secure the best terms for your insurance policy. We’re experts, so you don’t have to be. 

Morgan Insurance: From Start To Finish

As your insurance broker who specialises in insurances for the construction industry, we’ll be with you every step of the way. We’ll get you set up with a policy that works for you when you need it most. 

The best part? We make it easy to get started with us. Reach out today. A member of our team will take it from here, so your insurance isn’t something you need to worry about ever again.