How to Verify a Builder's Public Liability Insurance Coverage

Understanding Public Liability Insurance

Public liability insurance is a type of insurance that provides protection to individuals and businesses against claims made by third parties for injury, loss, or damage caused by their business activities. In NSW, licensed builders are legally required to maintain current public liability insurance as a condition of their building licence under the Home Building Act 1989. This insurance covers incidents that occur in a public place or on private property.

Incidents such as slip and fall accidents, damage caused to property, or injury caused by the business's products or services are typically covered by public liability insurance. The coverage amount for public liability insurance varies depending on the type of business and the risks associated with its operations.

However, most policies have coverage of $5 million, $10 million or $20 million or more to cover potential claims. The appropriate coverage amount depends on your project's scope, value, and risk profile, with larger residential projects typically requiring minimum $10 million coverage. It is important for builders to have adequate public liability insurance coverage to protect themselves and their clients from potential financial losses.

Related content: The Role of Public Liability Insurance in Protecting Homeowners

Common Public Liability Insurance Exclusions Homeowners Should Know

Understanding what public liability insurance does not cover is equally important as knowing what it covers. Standard policies typically exclude professional indemnity claims, defective workmanship claims, and claims arising from deliberate or reckless conduct. Coverage may also exclude damage to the work itself, pollution incidents, asbestos-related claims, and claims arising from work performed without proper permits or licenses. Additionally, most policies contain exclusions for work performed outside the builder's licensed scope or in breach of building regulations. Before engaging a builder, verify their policy addresses the specific risks associated with your project type. High-risk activities such as excavation near boundaries, demolition work, or structural modifications may require additional coverage beyond standard public liability insurance. Request written confirmation from the insurer that the builder's policy covers your specific project scope and activities.

Verifying a Builder's Insurance Coverage

When hiring a builder, it's crucial to verify their public liability insurance coverage. The following steps can help homeowners ensure that the builder is properly insured.

• First, request a Certificate of Currency (proof of current insurance) directly from the builder's insurer and check the policy details. The policy should be valid and up-to-date. Look for the policy's start and end dates, coverage limits, and the types of incidents covered.
• Next, verify the policy with the insurance company to confirm that it is valid and covers the builder's work. This can be done by contacting the insurance company directly or through an insurance broker. It's important to check the policy number, name of the insured, and the policy dates to ensure that the policy is current and valid.
• Finally, check the validity of the insurance policy by checking the insurance company's information. This will confirm that the insurance company is authorised to provide insurance in Australia and that the policy is valid. The information can be accessed online through the Australian Securities and Investments Commission (ASIC) website.

By taking these steps, homeowners can ensure that the builder they hire is properly insured and minimise their risk of liability in case of any incidents. Complete this verification process before signing your building contract, as discovering inadequate insurance after work commences creates significant legal and financial complications.

Related content: Steps to Verify Builder Licence and Insurance in NSW

Warning Signs That Indicate Insurance Coverage Problems

Several warning signs should alert homeowners to potential insurance coverage issues with their builder. Challenge 1: Delayed Documentation - Builders who repeatedly postpone providing Certificate of Currency or claim their insurance broker is unavailable may have lapsed or inadequate coverage. Challenge 2: Generic Policy Documents - Be wary of builders providing generic insurance brochures rather than policy-specific Certificates of Currency with their name, policy number, and current dates. Challenge 3: Unusually Low Coverage Limits - Builders carrying only minimum $5 million coverage for substantial residential projects may indicate cost-cutting that puts you at risk. Challenge 4: Reluctance to Verify - Builders who refuse to provide insurer contact details or resist direct verification attempts often have coverage problems. Challenge 5: Expired Documentation - Always check policy expiry dates, as some builders present old certificates hoping homeowners won't notice the coverage has lapsed. If you encounter these warning signs, do not proceed with the builder until insurance concerns are fully resolved. Consult a construction lawyer before signing any contract if verification attempts reveal coverage deficiencies or the builder cannot provide satisfactory proof of current, adequate public liability insurance.

What to Do if a Builder is Not Properly Insured

It is crucial to work with a builder who has valid and adequate public liability insurance coverage. If a builder is not properly insured, it could potentially lead to significant financial losses and legal issues.

In such situations, homeowners have a few options available to them. Proceeding with uninsured or underinsured builders exposes you to personal liability for workplace injuries, property damage to neighbouring properties, and third-party claims that could cost hundreds of thousands of dollars. They can refuse to work with the builder until they have obtained proper insurance coverage. Alternatively, homeowners can ask the builder to obtain the necessary coverage before commencing work.

It is advisable to consult with a construction lawyer to discuss the legal options available in such situations. Early legal advice can prevent costly disputes and protect your financial interests throughout the building process.