Usually not in the way business owners assume. A public liability policy covers the named insured for injury or property damage caused by its own activities. Independent contractors are separate businesses, so the public liability insurance contractors carry sits alongside yours rather than inside it. Some wordings do extend cover to subcontractors while they work on your behalf, but only on the terms written into the policy. Read the definition of insured and the subcontractor clause before you rely on either.
Who a public liability policy actually covers
A public liability policy responds when a third party is injured, or their property is damaged, because of your business activities. The people protected are set out in the definition of the insured, which normally names the entity on the schedule along with its directors, partners and employees while they act in the business. An independent contractor is none of those. They run their own business, invoice you for the work, and carry their own legal liability for how it is done.
That distinction bites hardest on a site with several trades working at once. Each business answers for its own negligence. If a subcontractor drops a tool from scaffolding onto a parked car, the claim points at the subcontractor first.
Employees are different. Anything your own staff do in the course of their work is your liability, and the policy treats it that way without further wording. The question only becomes complicated when the person doing the work is neither an employee nor a stranger, which is exactly what a subcontractor is.
Where subcontractors sit in the policy wording
Most Australian liability wordings say something about subcontractors, and the words vary far more than the summaries suggest. Three patterns turn up repeatedly:
- Subcontractors are treated as insured, but only while working on your behalf and only for liability arising out of your business.
- You are covered for liability you incur because of a subcontractor’s act or omission, while the subcontractor gets nothing under your policy.
- The policy is silent or restricts labour supplied by others unless that person holds their own liability policy at a stated minimum limit.
The third pattern is the one that hurts. Read as a condition, it lets an insurer decline a claim because the trade you engaged was uninsured. Many liability insurers also rate the policy partly on payments to contractors, so declaring those figures accurately keeps the premium and the cover consistent with each other.
Why you still collect a certificate from every trade
Ask for a certificate of currency showing the public liability insurance contractors hold, then check four things: the limit, the expiry date, the insured entity name against the ABN you are paying, and the business description against the work you are actually engaging them for. A plumbing policy will not answer for roofing.
Keep those certificates long after the invoice is paid. Liability claims surface years later, and by then the trade may have moved interstate or closed the company. The certificate is often the quickest way to work out which insurer was on risk at the time.
Set a simple rule in the office: no start on site without a current certificate, and a diary note for every expiry date that falls inside the job. A certificate collected in March tells you nothing about June. Where a trade works for you all year, ask for the replacement certificate at their renewal rather than waiting until the next project.
Written agreements do the other half of the work. A short subcontract that states who holds which policy, at what limit, and who wears the excess removes most of the argument later. Verbal arrangements between trades who have worked together for years are the ones that fall apart once lawyers are involved.
The liability that lands on you anyway
Being separate businesses does not put you out of reach. A principal can be sued for its own failures in selecting, supervising or coordinating trades, and a contract you signed can push responsibility back onto you through an indemnity clause. Employment status is a second trap. Someone you treat as a contractor may still be a worker for workers compensation, a state scheme question rather than a liability policy one, and WorkSafe Victoria sets out when contractors are deemed workers for WorkCover purposes. Business.gov.au covers the same status question from the engagement side.
Because both paths end at your own program, look at the whole business insurance arrangement rather than the liability section on its own.
Construction work needs more than a liability limit
Public liability answers for injury and third party property damage. It will not rebuild the half finished structure you are working on, replace stolen materials, or repair the existing building you are altering. That is the job of contract works and construction insurance, which head contracts commonly require alongside a liability limit. Principal conditions usually name both policies, the limits, and the parties to be noted on each.
Who arranges that cover is worth settling before work starts. On many projects the principal takes out a single contract works policy covering everyone on site, and subcontractors are noted on it. On others each trade arranges its own. Two policies over the same work create argument at claim time, and no policy over the work leaves the loss with whoever is holding the contract.
What FRS does
We read the subcontractor clause in your wording, compare it against what your contracts demand, and show you where the two do not line up. We check that the trades you engage hold current cover at the limits your contracts specify, and we place the gaps with the right policy instead of hoping the liability section stretches to fill them.
For limits, wordings and certificate requirements, see our public liability insurance page or call the Box Hill office.
Frequently asked questions
Does my policy cover a subcontractor's mistake on site?
Sometimes, and only on the terms in your wording. Many policies cover you for liability arising from a subcontractor’s work while they act on your behalf, without covering the subcontractor themselves. Others require that person to hold their own policy at a stated limit before cover applies at all. Read the subcontractor clause first.
What limit should I ask subcontractors to carry?
Match it to the contract you work under and the risk of the trade. Head contracts commonly call for twenty million dollars on larger projects and ten million on smaller ones, though that figure is a contractual requirement, not a legal minimum. As a rule, ask for a limit at least equal to your own.
Do I have to declare payments to contractors at renewal?
Usually yes. Many insurers rate liability partly on turnover and partly on payments to contractors and labour hire, so those numbers belong on the proposal and at every renewal. Understating them affects the premium and can affect how the insurer responds to a claim. Keep a running total through the year.
How long should I keep contractor certificates of currency?
Keep them for the full period the trade worked for you and well past the end of the job. Public liability insurance contractors held at the time of the incident is what matters, not what they hold today, and claims are often notified years after the work was finished.
