Why Builders Should Be Reviewing Their Cover Now 

If you work in construction, you already know risk comes with the territory. Tight margins. Complex contracts. Multiple subcontractors. Long project timelines. 

What’s changed recently isn’t the presence of risk — it’s how liability is being allocated when something goes wrong. 

Developments in New South Wales around the statutory duty of care and proportionate liability are reshaping the exposure landscape. And when liability shifts, construction insurance needs to shift with it. 

For many businesses, the cover arranged a few years ago may no longer reflect today’s legal environment. 

A Broader Duty of Care 

The Design and Building Practitioners Act 2020 (NSW) introduced a statutory duty of care for those carrying out construction work. Importantly, it extends well beyond the traditional builder. 

Engineers, project managers, consultants and others involved in the supply chain can all fall within its scope. The duty is owed to current and future property owners, and it cannot simply be signed away in a contract. 

That alone has widened the potential pool of defendants in building defect claims. 

Industry commentary, including analysis from Arthur J. Gallagher Australia, has highlighted how this change is influencing professional indemnity markets. 

Proportionate Liability Is Not Always a Safety Net 

A recent decision of the Supreme Court of New South Wales confirmed that proportionate liability protections may not apply to certain claims brought under the statutory duty of care. 

In simple terms, a builder or developer may be pursued for the full amount of a loss, even where subcontractors or consultants contributed to the issue. 

The practical implication? Exposure can concentrate on one party rather than being shared across the project team. 

From an insurance perspective, that increases potential claim severity. 

What This Means for Construction Insurance 

Insurance markets respond to legal change. When courts expand exposure, insurers reassess their appetite. 

We are already seeing: 

• Greater scrutiny on professional indemnity placements 

• More detailed proposal questions around design responsibility 

• Pressure on limits where defect exposure is high 

• Stricter underwriting for multi-residential and mixed-use projects 

Construction insurance is no longer just about physical damage during the build. The more significant claims often arise years later, when defects are discovered and parties look to recover economic loss. 

That is not something contract works insurance is designed to handle. 

Where Gaps Commonly Appear 

In practice, gaps tend to arise where businesses assume one policy will respond when it will not. 

Contract works insurance protects the project while it is being built. 

Public liability insurance responds to third-party injury or property damage. 

Neither is designed to address pure financial loss arising from defective design or construction. 

That exposure typically sits within professional indemnity insurance — if it has been arranged properly and with adequate limits. 

For design and construct builders in particular, this distinction matters. 

A More Practical Conversation 

Rather than asking “do we have insurance?”, the more useful question now is: 

Does our construction insurance reflect how liability is actually allocated today? 

That involves looking at: 

• Whether professional indemnity limits are appropriate for full liability exposure 

• How subcontractor insurance requirements are structured and verified 

• Whether contractual indemnities align with the insurance programme 

• How long defect exposure realistically extends for your project type 

This is not about alarmism. It is about alignment. 

Construction Insurance as a Risk Strategy 

Construction has always involved shared responsibility. What recent legal decisions have done is adjust how that responsibility can be enforced. 

For builders and developers operating in NSW — and increasingly across other jurisdictions watching these developments — insurance should be viewed as part of a broader risk management framework, not a compliance exercise. 

Policies arranged on price alone rarely reflect complex liability exposures. 

A structured review can identify whether your construction insurance programme matches your contractual position, your project profile and your long-term defect risk. 

FAQs About Construction Insurance Australia 

Does contract works insurance cover building defects? 

No. Contract works insurance is designed to cover physical loss or damage to a project during the construction phase. It does not respond to pure financial loss arising from defective design or construction discovered after completion. 

Why is professional indemnity insurance important for builders? 

Where a builder assumes design responsibility — particularly in design and construct projects — professional indemnity insurance can respond to claims arising from errors in design, documentation or professional advice. With expanded statutory duty of care provisions, this exposure is becoming more relevant. 

What is the statutory duty of care in NSW construction? 

Under the Design and Building Practitioners Act 2020 (NSW), individuals and entities carrying out construction work owe a duty of care to avoid economic loss caused by defects. This duty extends beyond traditional builders and cannot be contracted out of. 

Can a builder be held fully liable for subcontractor defects? 

Recent court decisions have confirmed that proportionate liability protections may not apply to certain statutory duty of care claims. In some cases, a builder may be pursued for the full amount of a loss, even where subcontractors contributed. 

How often should construction insurance be reviewed? 

Construction insurance should be reviewed annually at minimum, and whenever there are changes to project type, contract structure, design responsibility or jurisdictional exposure. 

Reviewing Your Construction Insurance Programme 

Legal frameworks change. Insurance policies do not automatically adjust with them. 

If your business operates in construction, particularly in NSW or across multiple jurisdictions, a structured review of your construction insurance programme can clarify whether your cover reflects current liability settings. 

Barrack works with construction businesses to align insurance structures with contractual, operational and legal exposures. 

If you would like to discuss how recent developments may affect your programme, speak with our team for a considered assessment.