Article by latest.insure
In the dynamic landscape of Australian small businesses, ensuring your operations are protected from unforeseen risks is always on your radar. This is especially pertinent when dealing with contractors.
Having the appropriate insurance can mean the difference between smooth, sustainable operations and financial catastrophe.
Importance of Contractor Liability Insurance for Business Owners
When your SME hires contractors, their work effectively becomes an extension of your business. It’s easy to assume your comprehensive insurance policies will cover them, but they may not.
That’s why it’s essential you require your contractors have their own liability insurance before they begin working for you. Make it an explicit part of the contract you have with them. That move helps protect both parties in case of accidents or damages on the job site.
Public liability insurance, for example, covers property damage, personal injury, legal costs, and third-party injuries. Meanwhile, professional indemnity insurance protects against claims due to advice or services that contractors provide – it helps ensure comprehensive coverage.
Risks of Hiring Uninsured Contractors
The risks of hiring uninsured contractors can be severe. Consider these issues they could cause:
Property damage that you need to pay to have repaired, such as cracked tiles or faulty wiring which results in a fire and damage
The contractor and their staff are injured while working on your site, so they may claim against your public liability insurance
Or others may be injured or suffer property damage resulting from your contractors’ shoddy work, and
Poor work quality due to their lack of licensing or appropriate qualifications and training.
Without proper insurance, your business is exposed to financial liabilities in case of accidents or property damage caused by the contractor’s actions. This could lead to potential litigation and legal consequences, impacting both your business reputation and financial stability.
Managing Risks as a Business Owner
To safeguard your business, take proactive steps to ensure that all contractors have appropriate insurance coverage.
1. Make such cover a non-negotiable part of your hiring process
2. Speak with their referees for peace of mind
3. Evaluate their safety performance, workers’ compensation, and recorded injury rates
4. Verify their qualifications where relevant
5. See if they’re on the insolvency list of the Australian Securities and Investments Commission
6. Request and verify Certificates of Currency regularly to confirm their cover is current and valid
7. Use a legal contract
8. Add a clause that sets out the contract is null and void if the contractors does not provide proof of current appropriate coverage
9. Check their ABN and if they are appropriately licensed
10. Implement a system to regularly check for insurance and licensing renewals to help ensure your SME is continuously protected against unforeseen risks.
Be mindful that if there’s a dispute over who’s liable, a court looks at the substance rather than the form of the relationship, says Hede Byrne Lawyers. They’ll consider the facts of each case. Their examination may find there was a vulnerability or inequity of bargaining power between you and your contractor. Proportionate liability might come under the spotlight, too.
The Independent Contractors’ Act 2006 offers guidance on unfair contracts as this official government website explains. The Fair Work Ombudsman helps demystify the difference between independent contractors and employees. There are hefty fines for businesses claiming an employee is really a contractor – known as sham contracting.
Woolworths lost a case for not taking reasonable care for a contractor’s safety. Meanwhile, Australia Post was held responsible when a contractor’s independent mail deliverer was injured while lifting heavy vehicles. That delivery person lacked qualifications and was working within Australia Post’s system. So, the appeal court determined Aussie Post had specific knowledge of risks related to parcel lifting.
Importance of Contractor Liability Insurance for Contractors
For contractors themselves, having the right insurance ticks the box for compliance and protects their livelihoods. Public liability insurance and professional indemnity insurance are essential. They offer coverage for potential legal costs and damages that could otherwise thwart their business.
Be sure to understand the fine print of insurance policies and that’s where we can help. We’ll update you as we regularly review your coverage details and adjust as needed.
Contractor liability insurance can be a legal requirement (depending on the type of work and industry) and a foundation for responsible business practice for SME owners and contractors. It protects assets, livelihoods, and reputations, ensuring peace of mind in an unpredictable business environment.
