Contract works insurance is intended to cover accidental damage or loss to the works being built.
If you’re thinking that the damage should be covered by the builder’s public liability insurance, this is complicated. Public liability only covers your liability for damage to someone else’s property. So, it would only be a public liability claim if the damaged item was owned by the homeowner, not the builder, at the time it was damaged.
In reality, many building contracts and terms of trade state that the works under construction are owned by the builder until they are paid for in full and handed over at the end of the job. If the damaged contract works are not yet owned by the homeowner then they haven’t suffered a loss. That means a liability claim can’t be made. Even if they have made progress payments to cover work done, the contract conditions may still expressly state that the builder owns the works until completed and fully paid for.
Here’s an example from a contractor’s terms of trade:
The Contractor shall retain ownership of the Works and all Materials until the Customer has paid all of the Price to the Contractor. On payment of the Price, ownership of the Works and Materials shall transfer to the Customer. The Contractor shall at all times retain ownership of all tools, materials and equipment that it provides or leaves at the Site.
Here’s another:
The Builder shall retain ownership of the any goods supplied until the Owner pays in full for the goods and all other goods and services supplied by the Builder.
It might help to think about it this way:
If you’ve supplied it your public liability insurance won’t cover it if it’s damaged during the project. It should be covered by the contract works insurance.
Some homeowners are reluctant to claim on their contract works insurance if the damage is caused by a contractor. But that’s what the policy is there for and it covers the builder and subbies too. You are as entitled to make a claim on it as they are, it doesn’t matter who arranged it. The same applies if you are a subbie working for a main contractor who holds the contract works insurance
If the damage is to some pre-existing property, ie. not part of the contract works, then it could be a public liability claim.
A contract works policy doesn’t cover pre-existing property (except if expressly added in certain situations).
In most cases the best way to think about it is if the damage is to part of the property under construction it is insured by contract works insurance. If the damaged property is outside the works then it’s a public liability claim.
In a Nutshell
Make sure there is both contract works and public liability insurance in place on every job!
The information presented in this article is general in nature and not intended to be financial advice for individual situations. You should speak to an expert about your specific circumstances and needs.