Almost every contractor has been asked for a specific public liability limit at some point, usually at the least convenient moment. The number in the contract is a minimum, not a recommendation, and the right limit for your business may be higher.
What the Limit Actually Means
Public and products liability responds to your legal liability for injury to other people or damage to their property arising from your business. The limit is the most the insurer will pay for any one occurrence — and defence costs may sit inside or outside that limit depending on the wording, which is worth checking.
What Head Contracts Typically Demand
- Light trades and low-risk services: often $5 million, sometimes $10 million.
- Civil, construction and earthmoving: commonly $10 million, frequently $20 million.
- Work near rail corridors, airports, ports, tunnels or live utilities: $20 million and up, and often specific extensions.
- Government and tier-one principals: $20 million is a routine starting point, with principal’s indemnity requirements attached.
If your certificate does not meet the contract, you are usually not getting on site — see what a certificate of currency shows.
Setting the Limit on Exposure, Not Just Contracts
The contract sets the floor. Your own worst realistic scenario should set the ceiling. Ask what would happen if the work went badly wrong:
- What is around the site? Multi-storey buildings, live traffic, adjoining businesses, high-voltage assets?
- What are you working near or under? Services, gas mains, fibre, rail?
- How many people are exposed at once? A public footpath is a different risk from a fenced greenfield site.
- What does downstream damage look like? Cutting a service can stop dozens of businesses trading, and those losses follow the person who cut it.
Why the Step Up Is Usually Cheap
Most claims are small; catastrophic ones are rare. Because of that, the premium for the layer between $10 million and $20 million is proportionally much cheaper than the first $10 million. It is one of the few places in an insurance programme where a large increase in protection costs comparatively little — worth asking for as an option at every renewal.
What the Limit Does Not Do
- It does not cover damage to the thing you were working on — that is where contract works and professional indemnity come in.
- It does not cover your own plant or vehicles.
- It does not cover injury to your own workers — that is workers compensation.
- Faulty workmanship is usually excluded, though resulting damage may not be.
Occurrence, Aggregate and Where Defence Costs Sit
Three details in the schedule decide how far a limit really goes.
- Any one occurrence. The most payable for a single event. Public liability is usually written this way, which is why one bad day does not exhaust the policy for the year.
- Aggregate. Products liability is commonly capped in the aggregate across the whole period, so several claims can erode it.
- Defence costs. Some wordings pay them in addition to the limit, others include them within it. On a long-running claim that difference can be substantial.
What a Serious Liability Claim Actually Includes
Operators tend to picture the repair bill. A serious claim is broader: the physical damage, the consequential losses of everyone affected, the cost of investigations and experts, legal defence over several years, and interest. A cut fibre optic cable is a straightforward example — the splice is cheap, and the losses of every business that went offline are not.
That is the reasoning behind buying a limit above the contract minimum rather than exactly at it.
Getting the Business Description Right
A liability policy responds to the business described in the schedule. If the description says “general earthworks” and you spend a fortnight doing demolition, working at heights or hot works, the cover may not follow the work. Review the description annually, and tell your broker when you take on something new — mid-term changes are routine and cheap compared with an argument at claim time.
Common Questions
Is products liability included?
Usually the two are written together and share one limit. If you manufacture, install or import, check how the products section is worded.
Can I increase the limit mid-term?
Generally yes, for the remainder of the period, at a pro-rata cost. Do it before you sign the contract rather than after.
Does a higher limit look better in a tender?
It removes one reason to be excluded, and it signals that the business is properly run. Some principals will not shortlist below their threshold.
Talk It Through
If a contract is asking for a limit you do not hold, get in touch or call 1300 983 940.
General advice only. This article does not take your objectives, financial situation or needs into account. Consider the relevant PDS and Target Market Determination before deciding on a policy.