Just about every type of general insurance includes a public liability - what does this mean, and do they overlap?

Many names

Public liability insurance can go by many names: builders' liability, construction liability, public liability, public & products liability, general liability, commercial general liability, broad form liability, advertising liability, property owner liability, tenant liability, just to name a few of the more common ones.

With a few modifications and optional inclusions, they're pretty much all the same thing - covering the risk of having to pay compensation for personal injury or property damage.

Scope

The difference between all of the different types of public liability is the scope of cover. For example, motor vehicle liability (which is a type of public liability) covers the risk in personal injury or property damage in relation to the use of a motor vehicle as a motor vehicle.

Home insurance public liability covers the risk of personal injury or property damage in relation to your occupancy or ownership of a home. Even though your home insurance includes public liability, it wouldn't be expected to cover motor vehicle liability (that's what car insurance is for!) or for owner builder risks (not being a standard "occupancy or ownership of a home" type exposure).

Owner builder public liability

Leading on, owner builder public liability covers the risk of personal injury or property damage arising from being an owner builder. So an example would be a passer-by being hit by debris from the work-site, or a contractor suing the owner builder for injury sustained under the owner builder's supervision and care.

Property damage examples could be a fire spreading from the owner builder's site and burning the neighbour's house, or even (and this has happened multiple times!) the owner builder accidentally driving a skid steer loader through the fence and into someone's car.

It's all about fault ...

The most important thing to remember is that public liability insurance is always defensive - it pays to defend the owner builder against allegations of wrongdoing. If the accident isn't your fault, there's no compensation to pay. So your public liability will defend you but absolutely won't give anyone money they don't deserve. If it's not your fault, neither you nor your insurer would pay the other person.

... because it's about being sued

A common misconception is that as long as someone "has insurance", there's nothing to worry about. That could simply not be further from the truth. Yes, your tradesmen should have their own public liability insurance to protect themselves; but their insurances do absolutely nothing for you as the builder. If you are sued for injury or damage (even if that injury or damage were 100% caused by the tradesmen), you need your own insurance to protect yourself. Your tradesman's insurance protects him - it does not protect you as well.

Public liability insurance requirement

That's why owner builders absolutely absolutely absolutely need their own public liability insurance. Even if you're not planning to physically work on your own project, ultimately you are the builder, and you're practically guaranteed to be dragged into any claim for injury or damage. Remember, as the builder, the buck stops with you. Even if you're completely blameless, you need expert legal advice (and money to foot the bill!) to defend yourself in any claim.

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Being an owner builder can be incredibly rewarding - you get to design your home your way, and create something truly unique and valuable.

But just like Spider-Man, with great power, comes great responsibility - if anything goes wrong on the project, you'll be the one held accountable.

Tip: Be actively involved in construction planning

As an owner builder, you'll have to take an active role in scheduling the work and the tradesmen. We'd urge you to build a little "fat" into your timeframes so that if any early stage of the build is held up (by inclement weather, illness, or other unforeseen events), you won't have to seriously delay later parts. We find that early delays cascade into a "snowball" sort of effect, and on tight projects, a one-week delay very early could lead to a many-month delay at the tail end.

Remember, lots of people are naturally optimists, and tend to under-estimate timeframes! Make sure you account for that.

Tip: Review the work being done

We regularly hear horror stories of owner builders picking the cheapest tradies they can find (because they're running out of time and money due to early budgeting errors), and having those "tradesmen" perform shoddy or completely ineffectual work.

If you discover the errors early, the financial damage is minimal - you can sack the contractor and hire someone more competent.

But if you only discover the error towards the end of the project ... you could be talking about many many thousands of dollars in rectification work, involving tearing down perfectly good work to get at the bad.

As a builder, you're responsible for checking the quality of the work being done. You can't buy insurance for "faulty workmanship"; catching that poor work early is part of the builder's job.

Tip: Make sure your contractors are insured

Tradesman insurance is inexpensive and readily available. Just about every insurer in Australia offers a competitive package for trades type insurance, and each state's "builders warranty" insurance facility is simple to use.

Yet we occasionally hear from owner builders that tradesmen ask the owner-builder to carry the insurance risk for the tradesman because he can't purchase it himself.

Don't try to do that! Your insurance covers your risks, e.g. someone suing you for injury or damage caused by the project. Your insurance does not, and absolutely should not cover the tradesmen themselves - they need their own insurance. If your cheap-but-available contractor says that he needs the owner builder to buy the tradie's own public liability or home warranty insurance, then we'd suggest you find a new contractor. If he can't get the insurance himself - there's probably a very good reason why.

Tip: Take advantage of all the training and advice you can get Owner builder training isn't compulsory in all states of Australia (though we think it should be!). Even if the training isn't compulsory in your state, we'd encourage you to take a training course (many are online and quite inexpensive). Remember this is one of the largest investments (your home) you're going to have - make sure you learn as much as you possibly can before committing your finances to the project.

If you're engaging a builder, project manager, or private certifier to run the project, make sure you talk to her (or him) as well! We always find that competent professionals like to share their wisdom with polite and engaged owner builders - talk about your timeline planning, your budget, and your vision for the project. A coffee chat early in the project could highlight some expensive errors to avoid.

Lastly: Get your own insurance

If you're renovating your home, make sure you talk to your existing home insurer as to the limits of cover. Don't assume that your home insurance covers everything (it won't). Most home insurers take the pragmatic line that your home insurance is for a home being lived in, not home on a construction site.

Comprehensive owner builder construction insurance is extremely affordable, and simple to obtain.

At Allrisk we try to be extremely transparent about our specialist owner builder construction insurance. Quotes take around 90 seconds to complete and are instantly e-mailed to you with a break-up in costs for all optional extras. We do that so you can pick-and-choose exactly what you want to insure, and won't pay for any insurance you don't need.

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... would have to be the number one question facing any owner builder.

From our perspective, it's a vital question, too, as that sets the maximum amount of money an insurer can reimburse you the following damage.

Build cost

For a starting point, talk to your council or to your private certifier. Chances are they've seen all of this before, and might have some tips for you as to a "standard" sort of per-metre figure to use. But that figure is just a starting point, costs can increase from there.

Timeline

Hopefully you've worked out a project timeline (whether in a Gantt chart or just with pencil and paper) so you have a rough idea of what needs to happen when. Now factor in some slippage - what happens (for example) if the brick delivery is delayed? Or the concreter falls ill (or busy on another job). What will a two week delay cost?

Sadly, delays cost more than just time. Hired in plant, equipment and temporary buildings need to be extended at additional cost, and the "competitively priced" tradesman may not be available for that new window of time.

Again, talk to your certifier or your builder to find out what a reasonable "slippage" percentage would be.

Materials shortages

Sometimes, some of the more exotic building materials have an unusual supply chain. The fancy wall materials coming from Eastern Europe (this is a real incident) could be delayed massively by shipping, or even a disaster like a fire at the originating factory. Those panels tick all the boxes, but if you can only have one supplier, there's additional time & money risk to account for as well.

Mistakes and accidents

Lastly, any damage on the project will cause delay while your tradesmen have to clear away the old damage and start again. Hopefully you're insured so the extra materials & labour cost will be indemnified ... but the time delay can't be insured.

We've seen disasters happen at the 11th hour, sending the owner builder almost back to the start line to rebuild. The costs were fully insured, but the aggravation and heartbreak isn't.

Simple advice

One simple thing is to find out what a professional builder would charge to do the work. It will probably be a lot more than your own projections, but part of that extra cost will be the builder factoring in slippage, supply chain disasters, and a general "cost overrun" allowance as well. On top of that Allrisk owner builders receive a 15% allowance for "escalation" to cover off some increased costs (typically following regional catastrophes) so you have a bit of additional leeway.

Why not get a range of quotes from us today? Our quote process is very simple to complete - 90 seconds on our online form and you'll have a quote document in your e-mail setting out a range of options to consider.

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might sound like a premium ride-sharing app for dogs (geddit, geddit?) but it's actually Latin for Utmost Good Faith, the foundation of all insurance contracts.

Luckily, in Australia, we've foregone all of the Latin in our insurance contracts, and insurers focus on the phrase Duty of Disclosure.

So what is it?

Utmost good faith means that both you and the insurer agree to tell the whole truth and nothing but the truth and to deal fairly and honestly with each other. And insurers do take this legal obligation very seriously - there are stiff financial penalties for failure from ASIC, APRA, and ombudsmen like FOS.

The urban legends you hear about insurers "doing the wrong thing" usually are just that - urban legends - it would be highly irregular for an Australian insurer to not follow the terms of the insurance contract very closely indeed. I always find that only a quarter of the real story makes it into the "urban legend", and that the cause of the original dispute was the insurer having the suspicion (rightly or wrongly) that the policyholder was trying to cheat them.

Duty of disclosure

The insurer's "duty of disclosure" is the policy wording. When offering you insurance, the insurer spells out all the terms and conditions into the policy wording (or PDS) and on the insurance schedule.

The client's "duty of disclosure" is to tell the insurer everything that a reasonable person would consider relevant to the insurer's decision to insure and the terms of such insurance.

What's relevant for an owner builder?

Really anything that increases the risk to the insurer; we ask a few questions as part of the quote process.

Relevant factors include:

Has the project already commenced?

Are you building a swimming pool?

Will there be a lot of demolition work?

Are you relocating or raising an existing structure?

Are you underpinning or shoring up neighbouring property?

Are you excavating very deep - more than one basement level?

And many more as well. No insurer would think to ask "is the building site inhabited by squatters?" but if it were, you'd be expected to tell the insurer upfront.

Common sense

The idea is that all of this is common sense - if it's reasonable to think someone would want to know about the extra risk on your project, then you should tell the insurer upfront.

Most owner builder projects are very straightforward, so we've optimised our quotation process for that. Unless you have to disclose something very much out of the ordinary, quotes take only 90 seconds to complete and are instantly e-mailed to you with options to consider, and a copy of the policy wording.

Make sure you look at the policy wording! If someone won't supply you with the policy wording as part of a quote, you have to wonder why - what is hidden in there?

At Allrisk we try to be transparent and open; we give you individual pricing on all extras and make our forms and documents accessible on our website.

If you have any queries or aren't sure about what should be disclosed as part of the quote, please drop us a line or give us a call 1300 255 747 and we'll help.

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A key term in insurance is "insurable interest" - it's a key requirement for you to be able to insure something. Yet this is one of the most misunderstood concepts, so let's look at what it means.

Interest"Interest" means an asset or responsibility belonging to you (the policyholder). Something that affects you personally, and for which you're responsible. So your car, for example, or your home under construction. Or the building materials you've purchased and sitting on site.

Think of these financially - if they were damaged, lost, or stolen, you would suffer a financial loss. You would have to pay to repair or replace the items.

Intangibles can be interests too

Another type of "interest" is more intangible - like legal liabilities or responsibilities. Like being sued for personal injury to a person or a worker in your care, or someone's property being damaged through your negligence.

These are financial interests too - if something happened to those, you would suffer a financial loss - because you'd have to pay to compensate the owner of the property or the person being injured.

Insurable

So that's the key here - if you have a financial interest in something, you may be able to insure it.

If your construction project is damaged, you would suffer a financial loss - you can, therefore, buy insurance.

If you negligently injure someone or damage property, you would suffer a financial loss - you can, therefore, buy insurance.

Common sense, isn't it?

What IS NOT insurable

But if you wouldn't suffer a financial loss, then you can't buy insurance. Since you don't have an insurable interest in the property, you can't buy insurance on it.

Most people seem to implicitly understand this in relation to cars. For example, you can insure your own vehicle against damage - because if it is in an accident, you would suffer a financial loss in getting the car fixed.

But if your neighbour damages his car, you would not suffer a financial loss. Hence you can't buy insurance over your neighbour's car so you get a payout if he has an accident.

Same with liability

It's the same concept with legal liability. If you're not actually responsible for the damage or injury, you can't buy insurance against the peril. A good (real) example would be a delivery driver running his truck into your neighbour's house while delivering bricks to your project.

Yes, the driver was delivering bricks to your project, but he wasn't acting under your supervision, and you certainly didn't tell him to drive his vehicle through the neighbour's fence.

You wouldn't expect to be held responsible for his negligence, so you can't buy insurance to pay out your neighbour for his own damage. If however you are blamed, we'd expect the insurer to step in to defend you.

Again, it's supposed to be common sense.

Consequences for owner builders

Make sure you have your own public liability insurance

Make sure you insure all of your own property and the property for which you're responsible

You can't insure the belongings of others (e.g. your tradesmen's own tools) because they're not your responsibility

You can't insure the legal liability of others (e.g. your tradesmen) because their actions aren't your responsibility

You can, however, insure your own legal liability (so if you do get held vicariously liable for your tradesmen, you would be protected).

Allrisk specialise in this type of insurance

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