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Are Builders taking on extra risk without knowing?

Jul 31, 2019

It’s been observed recently, that some subcontractors or “subbie’s” performing high risk duties such as waterproofing, plumbing, electrical, sheet piling and other high risk occupations, are passing off some (if not all) of the risk to the contractor or builder that employs them. This includes defects or failures in the products used to complete a job.

Why are they passing on the risk?

Traditionally, subcontractors would 100% back their work (ethically, operationally or via a subcontract agreement). However it appears due to the rising cost of insurance, it has resulted in some subcontractors looking for ways to off-load their risk. Some are struggling to get insurance at all.

Off-loading risk is generally done as a simple condition in their engagement documents or subcontracts. As a result of this condition, they’re effectively making the person who employs them, liable for the work they perform. Builders who take on this risk, find themselves incurring higher premiums, larger excesses (or both), or may become uninsurable themselves with the risk they have assumed. Especially if there is a claim.

What should builders do?

Be vigilant and read contracts thoroughly. It is wise not to accept these clauses when employing someone otherwise you could be held liable.  Search for subcontractors who don’t apply these clauses. Subbie’s that assume their own risk in most cases deliver better outcomes – they back the quality of their work, and their Insurers are backing them too. Subcontractors are employed as the masters of their specific trade and have a good understanding of the risks and risk management measures associated with that trade.

It is also vital that you have the right Insurance yourself. Speak to a professional Insurance Adviser. Do you understand what exposures you have? Do you manage people and projects? Insurance for Tradies and Builders is vital to ensure you are protected in the event something goes wrong.

Trade Insurance policies can vary and it’s important to understand how. Contact AustBrokers Comsure on 1800 122 194 if you need advice and a quote.

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