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 builders, developers and trade businesses across Australia.
Commercial fit outs and renovations can look straightforward compared with a new build, but from an insurance perspective they can introduce a very different set of risks.
A builder renovating an office, school, hospitality venue, medical practice or other commercial premises may be working around an existing building, valuable contents, neighbouring tenancies and, in some cases, the client’s employees or members of the public.
Before starting a commercial fit out or renovation, builders should understand what is being insured, who is responsible for the existing property and what happens when construction work is carried out in an occupied building.
What Insurance Do Builders Need for Commercial Fit Outs and Renovations?
Depending on the project and contract, builders undertaking commercial fit outs or renovations may need to consider Contract Works Insurance, Public Liability Insurance and, where design responsibility is involved, Professional Indemnity Insurance.
Key issues can include:
- Damage to existing structures
- Damage to the client’s contents or equipment
- Injury to employees, customers or members of the public
- Shared access to occupied areas
- Water, fire or electrical damage caused during the works
- Damage affecting neighbouring tenants
- Design responsibility for the fit out
- Contractual insurance requirements
Why Working in an Occupied Building Changes the Risk
A commercial renovation may take place while employees, customers or neighbouring tenants continue to use the building. Builders may need to consider how workers and the public are separated, shared entrances and access areas, temporary barriers and signage, dust and debris, tools and materials stored on site and temporary electrical works.
These exposures make appropriate Public Liability and Contract Works cover particularly important.
Contract Works Insurance for Fit Outs and Renovations
Contract Works Insurance is designed to cover construction work while a project is underway, subject to the policy terms and conditions.
For a commercial fit out or renovation, one of the most important questions is what exactly is being insured. The value of the new works may represent only part of the overall property at risk.
Builders should review both the value of the works and the existing property surrounding them.
Are Existing Structures Covered During a Renovation?
Existing structures are an important consideration when arranging insurance for renovation and fit out projects. A Contract Works policy should not automatically be assumed to cover the full value of an existing building.
Before starting work, establish:
- Who owns the existing structure?
- Who is responsible for insuring it?
- Does the owner’s existing property policy remain in place during construction?
- Does your Contract Works policy need specific cover for existing structures?
- Are there limits or exclusions that could affect the project?
- What does the building contract require?
Public Liability Insurance in Occupied Buildings
Public Liability Insurance is particularly important when builders and trades are working around people who are not part of the construction project.
Potential incidents can include customers tripping over construction equipment, falling materials causing injury or damage, water escaping into another tenancy, dust or debris affecting neighbouring businesses or accidental damage to the client’s property.
Builders should check that their liability limits and policy arrangements are appropriate for the project and meet any requirements contained in the contract.
What About the Client’s Contents and Equipment?
Commercial premises can contain expensive equipment, furniture, stock, technology and other assets that are not part of the building itself.
Before commencing work, builders should understand who is responsible for insuring these items and whether they need to be removed, protected or specifically considered as part of the project’s risk management.
Professional Indemnity Insurance for Fit Out Builders
Professional Indemnity Insurance may also be relevant where a builder accepts design responsibility as part of a commercial fit out or renovation.
- Design and Construct contracts
- Coordinating architects, engineers or other consultants
- Preparing or approving shop drawings
- Recommending materials, finishes or systems
- Providing technical advice or recommendations
- Failing to correctly communicate or pass on client instructions, specifications or changes, such as changes to colours, finishes or materials
- Vicarious liability arising from the professional services of subcontracted consultants, designers or engineers
- Accepting responsibility for specifications or performance requirements
Commercial Fit Out Insurance Checklist for Builders
- Is Contract Works Insurance in place for the required value of the works?
- Have existing structures been considered?
- Who insures the existing building?
- Are the client’s contents, stock or equipment exposed during construction?
- Will employees, customers or members of the public remain in the building?
- Does Public Liability Insurance meet the contract requirements?
- Are neighbouring tenancies potentially exposed to damage?
- Are there higher risk activities such as hot works, structural alterations or plumbing?
- Does the builder have any design or consultant coordination responsibility?
- Are subcontractors appropriately insured?
Frequently Asked Questions
Do I need Contract Works Insurance for a commercial fit out?
Contract Works Insurance is commonly used to protect construction works while a fit out or renovation is underway. Whether it is required, and the level of cover needed, will depend on the contract, value of the project and scope of work.
Does Contract Works Insurance cover the existing building?
Not necessarily. Existing structures may require specific consideration and should not automatically be assumed to be covered under a Contract Works policy.
What insurance do I need if a business stays open during renovations?
Where employees, customers or members of the public remain on the premises during construction, this creates an increased liability exposure. It is important that this is disclosed to your insurance broker so the risk can be reviewed and the appropriate Public Liability Insurance arranged.
Do commercial fit out builders need Professional Indemnity Insurance?
Professional Indemnity Insurance may be required where a builder has design or other professional exposures, including Design and Construct work, consultant coordination, vicarious liability for consultants, technical recommendations, or failing to correctly communicate client instructions or changes to finishes, materials or specifications.
Need Insurance for a Commercial Fit Out or Renovation?
At Be Covered Insurance Brokers, we work with commercial builders, contractors and trade businesses across Australia to arrange and review construction insurance for a wide range of projects.
Planning a commercial fit out or renovation? Speak with the Be Covered team about your insurance requirements before the project starts.
General information only: This article provides general information and does not take into account your specific business, contracts, projects or insurance needs. You should seek advice from a qualified insurance broker and, where appropriate, a legal adviser before making decisions about your insurance or contractual obligations.
