One of the most common gaps in commercial policies. Whether your sub-contractors are covered depends on your wording, their own insurance, and how your insurer classifies the arrangement.
If you engage sub-contractors, there's a reasonable chance you assume they're covered under your public liability policy when working on your behalf. Many small business owners are told this — by insurers at inception, by their own intuition, or by nothing more than a general sense that "covered" means covered.
The reality is more complicated. Whether your policy responds to a sub-contractor-related claim depends on how the claim is framed, how your policy is worded, what your sub-contractors carry themselves, and how your insurer classifies the working arrangement. Most of these factors are not discussed at renewal.
Your public liability policy covers claims made against your business for third-party bodily injury or property damage. It does not cover the sub-contractor's own liability — it covers the liability that attaches to you as the business engaging them.
Most policies include coverage for "principal's liability" — the liability that attaches to you as the principal when a sub-contractor causes an incident in the course of work they're performing for you. If someone is injured on your site as a result of a sub-contractor's actions, and a claim is made against your business (not the sub-contractor), your policy should respond to that claim.
The word "should" is doing significant work in that sentence. Three things can undermine it.
If the sub-contractor was performing work that falls outside your policy's defined activity scope, the insurer may argue the claim falls outside coverage. This becomes relevant when your business has expanded into new services or taken on work that differs from what was declared at inception. The scope of activities covered by your policy is defined by what you told the insurer your business does — not by what it actually does today.
Some policies exclude liability arising from "labour hire" arrangements. The definition of labour hire in an insurance context is typically broader than the legal definition — it can capture arrangements where sub-contractors are working under your direction, at your site, on your schedule, and are functionally indistinguishable from employees. If your insurer classifies the arrangement as labour hire, the exclusion may apply.
Some policies exclude liability arising from work performed by sub-contractors who you knew — or ought to have known — were not carrying their own public liability insurance. This exclusion creates a direct incentive to collect Certificates of Currency before sub-contractors start work. It also creates a question: how recent does a COC need to be? If a sub-contractor's policy has lapsed since you last collected a certificate, the exclusion may still apply.
The cleaner answer to the sub-contractor coverage question is that every sub-contractor you engage should hold their own public liability insurance. Your policy should be a backstop, not the primary protection for sub-contractor-related incidents.
For commercial work, $20M public liability is the standard minimum on most Australian project contracts. A sub-contractor carrying $5M or $10M may be technically "insured" but inadequately covered for a serious incident on a commercial site.
Collect Certificates of Currency before each engagement. Check that the policy is current and that the activity description covers the work being performed. A COC that confirms the sub-contractor has a $20M PL policy is not the same as confirming they have a $20M PL policy that covers the specific activities they're about to perform for you.
Request a copy of your full policy wording — not just the certificate or schedule — and look for:
If you can't answer these questions after reading your policy, the conversation with your adviser is overdue. The gap usually only becomes apparent at claims time — which is the worst possible moment to discover it.
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