All self-employed tradies will have heard of public liability insurance, but do you know what it actually covers?

More importantly, do you know what it does not cover?

In this guide we’ll briefly explain what public liability insurance covers for a typical trade or building business, as well as looking at some of the areas it does not cover.

We’ll break it down into a few common risks that a trade business could face:

  • Property Damage
  • Personal Injury
  • Legal Costs
  • Tool Theft
  • Building Materials
  • Professional Advice
  • Faulty Workmanship
  • Rectification Costs
  • Registered Vehicles

To be clear, the above list isn’t what public liability does cover. Rather it’s a list of risks that a tradie or builder could face, and we’re going to look at how public liability may or may not cover each one.

If there’s anything we haven’t covered off in the article that you’d like to know about, please call our friendly team on 1800 808 800.

Warning:  In this guide we’re going to use a lot of examples, but they are very basic examples without any great detail.  Every claim situation is different and many public liability policies can differ slightly in their wording.  Whilst this guide will provide general information and use examples to help explain the cover, none of the examples should be taken as confirmation that any particular policy will cover a certain situation.

Property Damage

Damage to property is one of the most common risks in a trade or building business, and it’s equally true if we’re talking about damage to your own property or damage to a third party’s property.

By “third party”, we mean someone that is not you, your business or one of your employees.  That’s a general description for the purpose of this article and shouldn’t be taken as a formal definition.

Property damage is covered by public liability insurance, but only in specific circumstances as we’ll discuss below.

What is covered?

Public liability covers you for property damage where you (or your staff) have caused damage to property owned by a third party.

Importantly, the damage must be a result of your negligence.  Essentially that means you must be at fault.  You must have been responsible for the damage occurring.

Let’s look at a real claim example involving a glass splashback.  In this example an electrician was installing a new rangehood in a kitchen and managed to scratch an expensive glass splashback.

The scratch was too deep to repair, so the entire splashback had to be replaced at a cost of $2,500.

The electrician was clearly at fault and a claim was paid under their public liability policy.

What is not covered?

Damage to your own property is not covered.  Although you could be responsible for accidentally damaging your own property, a public liability policy will only cover property owned by a third party.

Think of it like Third Party Insurance on your vehicle.  It will cover the damage caused to the other vehicles or property, but not damage to your own vehicle.

The policy will also not cover instances where you are not at fault.

Personal Injury

Another major risk for any tradie or builder is personal injury.  This could be to yourself (or your staff) or to a third party such as a client or member of the public.

What is covered?

Public liability insurance will cover personal injury (or death) suffered by a third party as a result of your negligence.

It works in essentially the same way as the property damage section we detailed above.

If a third party has been injured or killed, and you, your business or your staff are found to be responsible, your public liability policy will respond.

What is not covered?

Personal injury or death suffered by you or your employees is not covered by public liability insurance.

This is still a major risk which requires insurance however.  For yourself this would be through personal accident insurance, and for your staff if would be via workers compensation insurance.

Personal injury suffered by a third party is not covered where you are not responsible, but it will cover the legal costs involved in proving that you weren’t responsible.  We’ll cover that next…

Legal Costs

As business owners we’re forever at risk of legal action.

Whilst public liability insurance is not designed to cover general legal expenses, there are situations where it will cover the cost of defending you in court.

What is covered?

Your public liability insurance policy will cover the costs of defending you where a third party has accused you of property damage or personal injury.

If the property damage or injury is something that could potentially become a claim under your public liability, the insurance company may engage lawyers to fight for you.

For example let’s say a client of yours injured themselves at their home, and they blamed you on the basis that you were undertaking work at their house and left something unsafe.

You might not agree with their version of events, and let’s say you are completely in the right and not at all responsible for their injury.

That’s all good and well, but if it’s your word against theirs and neither side is giving up, there’s a good chance you’ll end up in court.

Even if you are able to prove your innocence in court, you’ll potentially rack up tens of thousands of dollars’ worth of legal fees, despite being in the right.

You cannot count on the court awarding costs, or even if they do, you can’t count on the third party having the funds to pay those costs.

So you’re out of pockets thousands of dollars…  Unless you have public liability insurance, which will covers those legal defence costs for you.

What is not covered?

The policy will not cover any other type of legal expense which is not related to a public liability claim.

Contractual disputes, employment disputes, debt collection and other legal expenses incurred by a tradie or builder are not covered by public liability insurance.

These are very real risks for any trade business owner however, and there are other forms of insurance which can assist.  Speak to one of our insurance brokers for more information on legal expenses insurance.

Stolen tradie tools

Tool Theft

Public liability insurance provides no cover for your tools.

This would be obvious to most tradies and builders, but we do have the odd client who will contact us after a tool theft and ask if their public liability covers them.

It’s worth asking the question if you’re unsure, but if you’re reading this, now you know.

New build destroyed

Building Materials

At any given time there could be many thousands of dollars’ worth of building materials on your work site.

Some of these materials might be owned by you, some by the building owner and some by other contractors working on the same site.

What is covered?

There may be cases where building materials are covered by public liability insurance, but they would have to be owned by a third party and there would have to be negligence involved.

An example could be a plumber working on a renovation.  He’s cutting some old metal piping with an angle grinder and doesn’t notice that he’s sparked a small fire behind him.

The fire damages a pile of timber that was purchased by the building owner and stored on site.

In this case the claim would be treated just like any other public liability claim involving property damage.  As long as the property is owned by a third party and there was negligence involved, the policy would respond.

What is not covered?

The policy will not cover any damage to your own property.  If in the example above the fire was caused by the same person or company that owned the timber, there would be no cover.

There will also be no cover if you are not at fault for the loss.

Let’s say you’re a builder working on a major house extension.

At the end of the day you do everything right to secure the property, but overnight someone breaks in and causes tens of thousands of dollars of damage by vandalising the property.

The damaged property and materials may be owned by a third party, but if you’re not responsible for the loss then your public liability policy will not cover you.

Of course this is a massive risk for any builder, which is why many builders protect themselves with a contract works insurance policy.

Contract works insurance is designed to cover a whole rage of risks, including events like this where you might be responsible for the site, but you haven’t been negligent.

Professional Advice

As part of running your business as a tradie or builder you’ll often find yourself providing advice, and that advice could rightly be seen by your clients as professional advice.

Your public liability insurance will cover some level of advice, but there is a line where public liability is no longer going to provide appropriate protection.

What is covered?

Note: What does and doesn’t constitute advice can only be assessed on a case-by-case basis.  The information below is designed to give you a basic overview.

Advice that is provided as part of the overall job, and not separately charged for, will generally be covered for a tradie under a public liability policy.

For example if you’re an electrician and you provide advice to a client that their wiring is in need of replacement, that’s typically okay.  You would then quote up the job and they’d either accept or decline your quote.

What is not covered?

Sticking with the above example, things would be different if the client had engaged you specifically to undertake a wiring inspection and you are going to charge them for a written report.

That report could be seen as professional advice and would not be covered by your public liability.

What that means is that if the client acts upon your advice and suffers a loss, you could be financially responsible for that loss.

The cover you would need in this case is professional indemnity insurance.  In some ways the cover is quite similar to public liability, but it’s covering the advice you provide rather than the physical work you undertake.

Faulty Workmanship

Public liability insurance will cover a tradie for negligence, but it won’t cover them for faulty workmanship.

What’s the difference you might ask?

When we’re talking faulty workmanship, typically we talking about something that might be your fault, but hasn’t actually caused any property damage or personal injury.

An example could be a tiler who tiles an entire house, only to later discover that he used the incorrect tiles or the incorrect pattern.

It may well be his fault, and there may be negligence, but since there hasn’t been any property damage or personal injury he would not be able to claim any costs against his public liability insurance.

Rectification Costs

Rectification costs often go hand-in-hand with faulty workmanship.  Afterall, rectification costs generally follow a case of faulty workmanship.

A public liability policy will not cover rectification costs, even where other aspects of the claim are covered.

An example could be a carpenter who has built a deck on a house, and the deck subsequently fails and results in the injury of multiple persons on the deck at the time.

The carpenter’s public liability insurance would cover the personal injury part of the claim, as the carpenter had been negligent in one or more aspects of building the deck.

However it would not cover the costs involved in rebuilding the deck.  That would be rectification costs.

Registered Vehicles

Vehicles, and in particular registered vehicles, are treated differently by public liability insurance depending on how they are involved in a claim.

What is covered?

If you cause damage to a motor vehicle that you are not driving, this may be covered by your public liability insurance.

For a tradie, a claim example could be that you’re carrying a ladder up a client’s driveway and you scratch a vehicle owned by a third party.

The policy would cover the costs involved in repairing the damaged vehicle.

A very different example is where you are driving a client’s vehicle.  This would be more common in the motor trades rather than construction trades.

This type of claim would be covered, but only if you have a “driving risk” extension included in your policy.  This covers you for damage you cause to a client’s vehicle whilst driving it.

What is not covered?

Going back to the driveway example, if you weren’t carrying a ladder and were instead driving your ute past your client’s vehicle when you scratched it, that would not be covered.

Virtually all public liability policies will have an exclusion relating to the operation of a registered vehicle.   

Instead of attempting to claim on your public liability, you would have to claim on your motor insurance.  This would be a standard claim on virtually any motor insurance claim.

More information

In some ways public liability is a very simple form of tradies insurance, but in other ways in can be quite complex.

In this guide we’ve run through a lot of different claim scenarios, but we do hope it has given you some insight into what a public liability policy is designed to cover.

At a very basic level it comes down to these two questions:

  1. Was property damage or personal injury suffered by a third party?
  2. Was it caused by your negligence?

If the answer to both questions is yes, and assuming you were acting within the policy limits (i.e. you weren’t undertaking works excluded by your policy) then the policy should respond.

Every claim is different and it is very difficult to talk about exactly what might happen in a hypothetical claim, but if you do have any claim scenarios you’d like to run by us please get in touch.

Our worst nightmare is that one of our clients suffers a claim that isn’t covered by their policies.  By asking us before the worst happens, we can ensure you do have the right policies in place to cover your full range of business activities.

For more information please contact your Trade Risk broker directly or call us on 1800 808 800.

What does public liability insurance cover?