30 September 2019

5 key pain points in construction public and products liability

Building contractors should definitely read the small print in these make or break areas of their business insurance contracts before they sign on the dotted line. The devil is in the detail.

    1. thumbnail construction insolvencies2Policy limit – do the maths

      Construction businesses should quantify what a worst case scenario in their business would cost in today’s money, taking associated liabilities into account. Exposure to third-party property damage and injury can be significant and common-law liabilities can‘t be capped under a contract. Do the maths. Is the cover sufficient to keep your business afloat if judgement goes against you for one of your biggest client’s most valuable projects?
    2. Contractual liability, bridging the gap

      All contractors assume contractual liability in some form, even if they’re not aware of it. Most insurance policies base the extent of contractual liability on what it would be without the contract, under common law. If indemnity obligations exceed this there will be a gap between the amount of the insurance cover and what is owed. Ouch! Rather than negotiate with an insurer on a contract-by-contract basis, Gallagher provides blanket cover on contractual liability.
    3.  Professional liability and public indemnity: know the difference

      These two are not the same but a public liability policy can cover a construction business for professional liability-type exposure in cases when third-party injury or property damage occurs. This is where getting expert advice can make a big difference to the extent of protection insurance provides. Gallagher policies contain specific wording that amends standard cover to include additional types of claims.
    4.  Care custody control

      Insurance cover for property in the care, custody or control of a construction business should take into account a number of grey areas for contractors working on pre-existing buildings, infrastructure or services. These grey areas include fit-out works and refurbishment works in particular and so require careful attention. Again wording is everything here in order to obtain a full policy limit for buildings worked in and on.
    5. Defective products – a single item can invalidate your entire project

      Another instance where wording can potentially save hundreds of thousands of dollars, product exclusion clauses can in some cases apply to all of the materials used on a job. In other words, a single defective part could make a contractor liable for all damages incurred in relation to their work ‒ or ‘product’ in insurance-speak. Make sure that exclusions only apply to the smallest part that is faulty.

Get expert help

Watch our whole of project construction insurance video or talk to one of the Gallagher construction industry experts to ensure that your potential pain points are fully covered.Learn more about our expertise in   construction insurance