Planning an owner builder project is
an all-consuming process. It’s exciting
and sometimes even a little scary.
Owner builders can find themselves
putting all their energy into planning
for the building process and sometimes
forget one of the absolute basics which
should be attended to before starting:
insurance. Some owner builders end
up seeking insurance part-way through
the project (which is extremely difficult
to obtain), while others get caught
up in the excitement and don’t spot
the oversight at all. In doing so they
not only leave themselves dangerously
exposed but can be in breach of legal
and/or statutory requirements.
Most owner builders are well
prepared, having considered the risks,
and aware of the need to insure. But
here’s where prior experience can lead
people astray. Before embarking on
their first construction project most
people are familiar with straightforward
insurance: you have a house – you get
house insurance, you have a car... Well,
you can see where this example is going.
But construction is not so simple.
Risk assessment
When considering the risks involved
with an owner builder project most
people realise that the insurance should
cover the building and the building
materials against fire, theft, storm,
vandalism, etc. during the course of
the project. This insurance is called ‘Contract Works’ and is essential.
The second realisation is that you’ll
need some insurance in case someone
gets injured on the site. This is the
complex part and it is where the owner
builder can potentially make some
incorrect assumptions.
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What claims can arise out of someone being injured?
1. Workers compensation
2. Public liability
3. Personal accident
The biggest source of confusion is
the difference between points 1 and
2. It is commonly assumed that if
someone is injured on a work site that
they will automatically lodge a workers
compensation claim. However this is
not always the case.
1. Workers compensation
In order for the injured party to
successfully claim workers compensation
from you they need to:
a) have been injured while working on
your project, and
b) qualify as a ‘worker’ as defined
under the relevant state or territory’s
workers compensation legislation.
2. Public liability
Public liability claims can arise out
of damage to someone else’s property
or an injury to a third party. For the
purpose of this article we’ll only be
discussing the latter; however it’s
important to note that if you have a
public liability policy in place you’ll be
covered for both.
Injury-related public liability claims
arise when, for whatever reason, the
injured party believes that you are
responsible for their injury by way of
negligence. Since an owner builder
is effectively in charge of all activities
undertaken on the construction site,
in addition to being responsible for
ensuring the safety of the site, this can
often make you somewhat of an easy
target. Having said that, the onus is
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then on the claimant to prove their case
against you, and they may or may not be
successful in doing so.
For this reason the claimant (if they
are also a worker) will generally attempt
to claim workers compensation as their
first option. A public liability claim may
then be made if they are unsuccessful
in getting workers compensation, or if
they obtain workers compensation but
wish to claim against you for amounts
above and beyond limitations within
the workers compensation system.
If the injured party is definitely not
a worker (for example a visitor, whether
invited or not), then there will be no
such confusion. The claim will always
be a public liability claim.
3. Personal accident
If you, your spouse or friends
(‘volunteer workers’) are intending to be
involved in the physical labouring on
your project without receiving payment,
you may wish to take out personal
accident insurance. This is important
to consider since you will generally not
be able to claim under either workers
compensation or public liability.
This insurance can be obtained either
individually or as a group policy. You
may already have an income protection
or a personal accident policy in place
and these may be suitable (ask your
broker or insurer). If you don’t already
have a policy of this type, or if you
expect to have volunteer workers, then
a group personal accident policy may be
the most suitable option. This type of
policy generally covers the owner builder
and declared spouse while performing
work at the project site, and any other
person carrying out work on the same
site who does so without being paid.
Contact your owner builder insurance
advisor/broker for further details.
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