Written by Candice Klau, Managing Director, Be Covered Insurance Brokers
Candice has more than 20 years of insurance broking experience and specialises in construction insurance for commercial builders across Australia.
On a commercial construction site, the principal, head contractor and subcontractors often work under different contracts. If property is damaged or someone makes a claim, whose insurance responds?
The answer is not necessarily the policy held by the party that caused the problem.
In Australia, construction insurance responsibilities are usually set out in the project contracts. Whether a claim is insured then depends on legal liability and the wording, exclusions and insured parties under the relevant policies.
For commercial builders, checking both the contract and the insurance arrangements before work starts is essential.
Who arranges insurance on a commercial construction project?
There is no universal arrangement. The principal or developer may organise project-wide cover or require the head contractor to do so. The head contractor commonly has obligations relating to Contract Works Insurance, Public Liability Insurance and verification of subcontractor policies.
Subcontractors are often required to maintain their own liability cover and other insurance specified in their subcontracts.
A policy arranged by the principal may insure several project participants, but that does not mean every business is protected for every loss.
Equally, a subcontractor having a Certificate of Currency does not prove that the policy meets the head contract requirements.
For example, the principal may require the builder to insure the works for their replacement value, while also maintaining liability cover at a specified limit.
The builder needs to establish whether those requirements are met through its own policies or a principal-controlled program, rather than relying on an assumption made during tendering.
Does a head contractor’s insurance cover subcontractors?
Sometimes, for particular risks. Contract Works Insurance may include the subcontractors’ interests in insured construction works.
But this is different from insuring each subcontractor against claims for its own legal liability, professional errors or costs of resultant damage from defective workmanship.
Commercial builders should confirm who is listed or defined as an insured, which project activities are covered, whether existing structures are included, and what limits, excesses and exclusions apply.
It is also important to check whether the head contract requires special endorsements or specific treatment of the principal’s interests.
The critical question is not simply “Does everyone have insurance?” It is “Do the policies satisfy the contract and protect the parties against the risks each has agreed to carry?”
Reviewing the actual policy schedule and relevant endorsements can reveal differences that are not obvious from a certificate.
Where responsibilities are unclear or the contract asks for unusually broad indemnities, seek clarification before accepting the terms.
What happens when everyone assumes someone else is covered?
Consider a hypothetical warehouse fit-out.
A mechanical-services subcontractor damages existing electrical infrastructure. The principal looks to the head contractor to put it right.
The head contractor expects the subcontractor’s Public Liability policy to respond; the subcontractor assumes the project policy will cover the damage.
The outcome may depend on whether the infrastructure is treated as existing property or part of the insured works, who is legally liable and how each policy defines the insured parties and exclusions.
Contractual indemnities may add further complexity. The cost of dealing with the incident can rise quickly if responsibilities were never checked.
This example is illustrative only; an actual claim must be assessed against the policy and contract documents.
Four checks before signing a commercial construction contract
1. Confirm who arranges each policy.
Identify responsibility for Contract Works, Public and Products Liability and any design-related or project-specific insurance.
2. Confirm who is insured.
Do not confuse being noted as an interested party with having insured rights under the policy.
3. Verify subcontractor requirements.
Check insured activities, policy limits, expiry dates and any contractual endorsements, not just the Certificate of Currency.
4. Review obligations beyond standard cover.
Indemnity clauses, excess allocation, existing-property risks and design responsibilities may create exposures that require separate advice.
Why specialist insurance advice matters
For established commercial builders and head contractors, insurance is part of contract risk management, not just a document required before site access.
An arrangement that works for one project may not suit the next, especially when project values, design obligations or subcontractor structures change.
Be Covered Insurance Brokers helps commercial builders review construction insurance requirements, understand policy wording and identify potential gaps before signing contracts or commencing work.
Before your next commercial project, confirm who is responsible and what is actually covered.
Contact Be Covered Insurance Brokers to discuss your insurance arrangements.
General information only. Insurance cover depends on the policy terms and claim circumstances. Obtain insurance and legal advice for your specific project.
