Most tradies are surprised how narrow their cover actually is once you strip out the exclusions. Here is what public liability, contract works and workers' comp each leave out — and the gaps between them that bite.
Public liability is NOT a workmanship warranty
PL pays for third-party injury and damage — not for fixing your own work or running the business badly. It excludes:
- Faulty workmanship / your product — it pays for the resultant damage to other property (the flooded house) but not for re-doing the faulty work.
- Professional advice, design or certification — that is PI. Choosing materials or advising on a load-bearing wall is a grey zone PL may not touch.
- Your own property — tools, vehicles, hired plant, materials in your care.
- Injury to you or your workers — workers' comp or your own cover.
- Deliberate, illegal or unlicensed work, and fines and penalties.
- Asbestos and gradual pollution — usually excluded or strictly limited.
- Contractual liability you take on beyond ordinary negligence — broad indemnities, guarantees of result, delay LDs.
Contract works pays for sudden damage — not bad work or delays
Contract works (construction all-risks) covers sudden physical loss or damage to the works during construction — but the exclusions gut the common scenarios:
- Gradual deterioration (rust, rot, moisture ingress) — so a waterproofing failure found months later fails.
- The defect itself — it may cover resultant damage to sound parts, but not rectifying the mis-pitched roof.
- Loss found only at stocktake (no identifiable event) — which kills poorly documented theft claims.
- Delay penalties, lost profit, lost rent — only physical damage is paid.
- Plant breakdown (cranes, generators) — separate cover.
- Theft without forced entry ("walk-off" losses).
It is for sudden physical damage while building — not to fix bad work, cover delays, or bail out gradual problems.
The gaps between the three that bite
You have three boxes — PL (third-party), contract works (physical damage to the works), workers' comp (employee injury) — and these fall between them:
- Your own income if you are hurt or sick — none of the three covers a sole trader's lost income (you need income protection or personal accident cover).
- Fixing your own defects with no other damage — it comes out of your margin.
- Design, advice or certification — pure financial loss, so you need PI.
- Contractual risk you signed up to — broad indemnities and guarantees.
- Your gear, ute, data and cyber — own-property, motor and tools cover.
- An uninsured or unlicensed subbie — the claim falls into a gap and you are left liable with no recovery, so vet their certificates (see Engaging Subcontractors).
Why claims get denied — and how to protect yourself
Claims fail for an exclusion; non-disclosure (you did not tell the broker the work changed — you went into demolition or high-rise); underinsurance (you forgot demolition, debris or fees in the sum insured, so you get a proportionate payout); breach of conditions (you did not secure the site, or notified late); or poor documentation (no photos or invoices).
Protect yourself: keep your policy's business description matched to your actual work, review the exclusions and sums insured annually, vet your subbies' certificates of currency, and keep dated photos and records. When something happens, notify early (even a "potential" claim), preserve the evidence, and do not admit liability — report the facts.
Common mistakes
- Assuming PL fixes defects — it does not.
- No income protection as a sole trader.
- Not declaring changed or higher-risk work to the broker.
- An uninsured subbie leaving a gap.
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