Subcontractors and certificates of currency: protecting your public liability cover
Why uninsured subcontractors raise your liability premium and risk, how to check a certificate of currency properly, what to put in subcontracts, and NSW subcontractor statements.
If a subcontractor damages property or injures someone while working on your job, the injured party will often pursue you as the business that engaged them. Your own public liability policy may cover your liability for their work, but many insurers charge more for uninsured subcontractors, apply a higher excess or exclude their work entirely. The practical protection is to require every subcontractor to hold their own public liability at a suitable limit, check their certificate of currency before they start and at each renewal, and keep a record. A certificate shows cover at one point in time, so check the dates and confirm cover directly if anything looks wrong.
This guide is part of the business insurance quote checklist. Figures are illustrative. The limit you require of subcontractors should follow the logic in choosing a public liability limit, and a broker can help write the requirements; see broker or direct.
Why insurers care about subcontractors
When you ask for a quote, insurers usually ask how much you pay subcontractors and whether they are insured. Uninsured subcontractor work increases the chance that a claim lands on your policy, and the insurer has no one to recover from. Typical underwriting responses:
| Subcontractor situation | Typical insurer response |
|---|---|
| All subcontractors hold their own public liability | Usually no loading |
| Some uninsured subcontractors | Payments to them added to your rating base |
| Uninsured subcontractors doing high-risk work | Exclusion, higher excess or decline |
| Labour hire workers under your direction | Treated more like employees; check workers compensation too |
Illustrative arithmetic: an insurer rates a builder at $2.40 per $1,000 of turnover plus $3.20 per $1,000 paid to uninsured subcontractors. With $1.5 million turnover and $300,000 paid to uninsured subcontractors, the premium before taxes is $3,600 + $960 = $4,560. If those subcontractors all held their own cover, the $960 loading would disappear.
How to read a certificate of currency
A certificate of currency is issued by the insurer or broker and confirms that a policy is in force. Check each of these:
- Insured name and ABN match the subcontractor's business that you have contracted with. A certificate in a related company's name may not protect the entity you engage.
- Policy type is public liability (and products liability if relevant), not just a business pack's property sections.
- Period of insurance covers the dates of your job. Diarise the expiry.
- Limit of liability meets your contract requirement, often $10 million or $20 million.
- Business description matches the work they will do for you. A "carpentry" certificate may not cover roofing.
- Insurer is named and is an authorised insurer.
- Interested party notation, if your contract requires you to be noted on their policy.
Certificates can be cancelled after they are issued. For high-value or high-risk work, ask the subcontractor to authorise their broker or insurer to confirm currency to you, or ask for an updated certificate before each new stage.
What to put in your subcontract
- A requirement to hold public liability at a stated minimum limit for the duration of the work and for a period after completion if products or completed operations risks apply.
- A requirement to provide a certificate of currency before starting and on renewal.
- Workers compensation as required by the state scheme, and evidence of it.
- A requirement to notify you if cover is cancelled or changed.
- An indemnity clause that is fair and that the subcontractor's insurer will accept. Very wide indemnities can fall outside their cover; see contractual liability and indemnity clauses.
Workers compensation and subcontractor statements
Workers compensation is a separate risk from public liability. Each state has its own rules on when a contractor is treated as a worker. In NSW, a principal contractor can be liable for a subcontractor's unpaid workers compensation premiums, payroll tax and wages unless it obtains a written subcontractor's statement for the relevant period. Other states have different arrangements. Check with your state workers compensation regulator.
Worked example: an uninsured subcontractor claim
An illustrative head contractor engages a plasterer who says they are insured but never provides a certificate. The plasterer leaves a sheet leaning against a wall; it falls and injures a homeowner's child. The family claims against the head contractor and the plasterer.
- The plasterer's policy had lapsed two months earlier, so there is no insurer for that share.
- The head contractor's insurer accepts the claim but applies a $5,000 excess for uninsured subcontractor claims, as set out in the schedule.
- The insurer may seek to recover from the plasterer, who may have no assets.
Had the head contractor checked a current certificate, the plasterer's insurer would have shared or taken on the claim, and the head contractor's special excess would not have applied.
A subcontractor management checklist
- Keep a register of every subcontractor, their certificate expiry dates and limits.
- Request certificates before work starts and at each renewal.
- Match the business description to the work.
- Keep copies of subcontracts and safe work method statements.
- Tell your insurer accurately how much you pay insured and uninsured subcontractors.
- Review the register at your own renewal; see the quote preparation checklist.
Work health and safety duties
Under the harmonised WHS laws in most states and territories (and the Occupational Health and Safety Act 2004 in Victoria), each person conducting a business or undertaking has duties to manage risks so far as reasonably practicable, and duties can overlap between head contractors and subcontractors. Insurance does not remove these duties. See Safe Work Australia and your state regulator.
Frequently asked questions
Does my policy automatically cover my subcontractors?
Usually your policy covers your liability arising from their work, not their own liability. They need their own policy.
Can I add a subcontractor to my policy?
Some insurers can extend cover, at a price. It is generally better for subcontractors to hold their own cover.
Is a certificate emailed by the subcontractor enough?
It is a good start, but certificates can be out of date or altered. For important work, confirm directly with the broker or insurer.
Do labour hire workers need their own public liability?
Usually the labour hire agency arranges cover. Ask the agency for certificates of currency for public liability and workers compensation.
Sources
- Safe Work Australia — WHS duties and links to state regulators
- SIRA — NSW workers compensation and subcontractor statements
- Revenue NSW — payroll tax and contractor rules in NSW
- business.gov.au — hiring contractors and insurance
