Understanding Public Liability Insurance: What Tradies Need to Know
Updated: Jul 15
One of the biggest misconceptions among tradies and contractors is believing Public Liability Insurance will automatically cover faulty workmanship. Unfortunately, that is not always the case.
Many business owners only discover the difference after a claim has been denied. This leaves them to personally pay for repairs, replacement costs, or property damage claims. Understanding what Public Liability Insurance does and does not cover is critical for plumbers, electricians, painters, carpenters, concreters, and other trades operating in Australia.
In this guide, I will break down how faulty work claims work, what “resultant damage” means, and why policy wording matters more than many businesses realise.
What Is Faulty Workmanship?
Faulty workmanship refers to work that has been completed incorrectly, negligently, or below the required standard. This can include:
Incorrect installations
Poor construction methods
Defective repairs
Incorrect wiring or plumbing
Poor surface preparation
Using unsuitable materials
Failure to follow building standards or manufacturer guidelines
Faulty work itself is generally considered a business risk rather than an insured event. That distinction is extremely important.
Does Public Liability Insurance Cover Faulty Work?
In most cases, Public Liability Insurance does not cover the cost of fixing or redoing your own faulty work. However, it may respond if your faulty work causes separate property damage or injury to a third party. This is commonly referred to as “resultant damage.” The difference between faulty workmanship and resultant damage is where many claims disputes occur.
Faulty Work vs Resultant Damage
Faulty Workmanship
Faulty workmanship refers to the defective work itself. For example, a painter incorrectly applies waterproof coating to a balcony, and the coating fails. The cost to remove and reapply the coating is generally not covered.
Resultant Damage
Resultant damage is the separate damage caused by the faulty work. For example, if the failed waterproofing allows water ingress, it may damage timber flooring and ceilings inside the property. The resulting water damage may be covered under the Public Liability policy.
Plumbing Claim Example
Consider a plumber who installs pipework incorrectly in a residential property. Several weeks later, the pipe bursts inside the wall cavity, causing:
Water damage to cabinetry
Damaged flooring
Ceiling collapse
The insurer may cover:
Third-party property damage
Legal liability costs
Repair costs for the resulting water damage
However, the insurer will likely not cover:
The cost of replacing the defective plumbing work itself
Rectifying the incorrectly installed pipe
Electrical Claim Example
An electrician incorrectly wires a switchboard, causing a power surge that damages the customer’s appliances and electrical equipment. The policy may respond to:
The damaged appliances
Third-party property damage
Associated liability costs
But it may not cover:
Rewiring the faulty switchboard installation itself
Painting Claim Example
A painter fails to properly prepare surfaces before applying exterior paint to a commercial building. The paint begins peeling within months, and moisture enters the wall cavity, damaging internal plaster and flooring. The insurer may cover:
The internal water damage
Resulting third-party property damage
But may exclude:
The cost of repainting the defective external work
Why Claims Get Denied
Many tradies believe having “Public Liability” means any issue connected to their work is insured. In reality, policy wording and exclusions matter heavily. Common reasons faulty work claims are denied include:
Poor Workmanship Exclusions
Most policies contain exclusions for the cost of repairing defective work.
Product or Work Defect Exclusions
Some policies limit or exclude damage arising directly from faulty products or workmanship.
Professional Advice Exclusions
Design errors, specifications, or incorrect professional advice may fall outside standard Public Liability cover.
Contractual Liability Issues
Some contracts impose liabilities broader than what the insurance policy covers.
Incomplete Disclosure
Failing to accurately disclose business activities can create claim issues.
Why Choosing the Cheapest Policy Can Be Dangerous
Not all Public Liability policies are equal. Two businesses may both hold a $20 Million Public Liability policy, yet the exclusions and coverage can differ significantly between insurers. Cheaper policies can sometimes contain:
Broader workmanship exclusions
Subcontractor restrictions
Heat work exclusions
Professional duty exclusions
This is why reviewing the wording properly matters, especially for higher-risk trades.
What Insurance Helps Alongside Public Liability?
Depending on your trade and business activities, you may also need:
These covers can help fill gaps that Public Liability alone may not address.
Final Thoughts
Public Liability Insurance is designed to protect businesses against claims for third-party injury or property damage. It is not intended to act as a warranty for poor workmanship or defective work itself. Understanding the difference between faulty workmanship and resultant damage can help tradies avoid major financial surprises and ensure they arrange the right protection for their business.
At Monarch Insurance Brokers, we help Australian businesses understand what their insurance actually covers, what exclusions may apply, and how to structure protection properly for their trade and risk exposure.
Need Help Reviewing Your Liability Cover?
Whether you are a plumber, electrician, painter, carpenter, or contractor, we can help review your current policy wording and explain how your cover may respond in the event of a claim. Visit Monarch Insurance Brokers Public Liability Insurance to learn more or request a quote.
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This article is general information only and does not constitute financial product advice. Your circumstances may differ — speak to a licensed broker for advice tailored to your situation.
