Contract works vs public liability insurance: what's the difference?
Contract works vs public liability: the quick version
They cover different problems on a construction site.
Contract works protects the project
It can cover physical loss or damage to the work being built and materials, depending on the policy.
Public liability protects against claims from other people
It can cover your legal liability if your work causes injury or damages someone else's property.
One doesn't automatically replace the other
A builder can have both exposures on the same job.
Home warranty insurance is different again
State-based residential building schemes serve another purpose and shouldn't be confused with either policy.
Contract works and public liability are two of the most important types of insurance to understand in construction.
They're also easy to mix up.
A simple way to think about it is:
Contract works looks after the project being built.
Public liability deals with claims for injury or damage to somebody else's property.
What does contract works insurance cover?
Contract works insurance is designed around physical loss or damage to construction work while the project is underway.
Depending on the policy, this can include things such as:
- work in progress
- construction materials
- temporary works
- certain materials away from the site or in transit
- existing buildings where specifically covered
- debris removal
- other project-related costs
The events covered vary between policies.
What does public liability cover?
Public liability insurance deals with legal liability to other people.
For example, it may become relevant if your construction activities:
- injure a member of the public
- damage a neighbouring property
- damage a client's property
- cause another type of third-party property loss
The policy terms and exclusions still apply.
A simple example
Imagine a storm damages a partially completed house.
Damage to the project itself is the type of issue contract works insurance is designed to deal with.
Now imagine work on the same site causes damage to the neighbour's property.
That is the kind of issue public liability insurance may deal with.
Same construction site. Two different risks.
Do builders need both?
Many builders consider both because they protect against different things.
You may also have contractual, client, lender or licensing requirements depending on the project and where you work.
Don't assume what's legally or contractually required without checking the relevant contract and local rules.
Who should arrange contract works insurance?
The building contract can be important here.
Depending on the arrangement, contract works insurance might be arranged by:
- the builder
- head contractor
- developer
- project owner
- owner-builder
Check who is responsible before work starts.
Having two parties assume the other one arranged the insurance is an obvious way for a gap to appear.
What about subcontractors?
Using subcontractors doesn't mean you can ignore your own insurance.
Likewise, subcontractors should have the insurance required for the work they perform.
Check certificates of currency where appropriate and make sure responsibilities are clear.
Is home warranty insurance the same thing?
No.
Home warranty, domestic building, home indemnity and home building compensation schemes are state and territory based protections relating to certain residential building work.
They are different from contract works and public liability.
The scheme name, requirements and operation can change depending on where the project is located.
What about workers compensation?
Different again.
Workers compensation deals with workplace injury arrangements for workers.
Requirements differ depending on your business and jurisdiction.
Don't treat public liability as a substitute for workers compensation.
What should you compare?
For contract works, look at things such as:
- project types
- maximum contract value
- existing structures
- materials
- insured events
- excess
- policy period
- exclusions
For public liability, check:
- liability limit
- activities covered
- subcontractor arrangements
- exclusions
- geographic limits
- excess
Comparing both properly gives you a much clearer picture of how the overall insurance setup works.
Frequently asked questions
Does public liability cover damage to the building I'm constructing?
Not necessarily. Public liability is mainly concerned with your liability to third parties. Contract works is the cover designed around physical loss or damage to the project itself.
Does contract works include public liability?
Some insurance packages can provide both, but don't assume this is automatic. Check which sections are actually included.
Is contract works the same as builders warranty insurance?
No. They serve different purposes.
Who normally takes out contract works insurance?
It depends on the construction contract and project arrangement. Builders often arrange it, but principals, developers and owner-builders can also be responsible in some situations.
Do subcontractors need their own public liability insurance?
Subcontractors may need their own insurance depending on their work and contractual requirements. Builders should check the arrangements rather than assume they're automatically protected by somebody else's policy.