Insurance – A Guide for Project Managers

• Setting the types and levels of insurance policies a Principal requires is an important part of the procurement process.
• There is not a lot of point in a contractor having unlimited liability under the contract if a claim of any significance will result in the contractor going into liquidation.
• Types of cover that should be mandated (depending on the nature of the contractor and the contract), include:
  • public liability
  • professional indemnity
  • workcover for the contractor’s workers (which is required by law)* and
  • contract works insurance for specific projects.
• appropriate levels of cover will differ depending on the procurement, but generally, $20 million will be adequate for public/products liability and for professional indemnity (although the risk of a Principal will be mitigated with a significantly lower level of professional indemnity in low-risk procurements). Contract works insurance will ordinarily either refer to the value of the works or an agreed amount of cover.
• This article is written with Principals in mind. It is not a review of all insurance types available to business. For more detail about insurance types, see related articles on “Insurance” and consult an insurance broker.

Note: Workcover (Employer’s liability to its employees (or workers)), is not discussed here as the laws are encased in each State and Territory under various legislation.