Design and construct
Claims that a design element you took responsibility for under a D&C contract failed.
Builder Professional Indemnity
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Builder Professional Indemnity
Professional indemnity for builders who carry design responsibility.
Most builders carry public liability and the statutory home warranty product for their state. Professional indemnity is the separate one, and it responds when the allegation is about a decision rather than damage - a design-and-construct element that fails, a product substituted on site, or advice given to an owner. The more design a builder takes on, the more it matters.
What is it?
Builders work under state licensing through bodies such as the QBCC in Queensland, the VBA in Victoria and NSW Fair Trading, and residential work also requires the relevant home warranty or domestic building insurance scheme. Professional indemnity sits outside those schemes and applies where the builder carries design, certification, project management or advisory responsibility, most often under design-and-construct contracts.
What does builder professional indemnity cover?
Specification and substitution
Losses from a product or method substituted on site without full design review.
Project management advice
Exposure from programming, cost advice and decisions made on the owner's behalf.
What affects the cost?
- Licence class and work types
- Annual turnover and contract values
- Proportion of design-and-construct work
- Residential apartment exposure
- Claims history
Worth raising on the call
- Home warranty schemes protect the owner, not the builder, and are not a substitute for PI.
- Taking design responsibility off a consultant transfers that liability onto your policy.
- Cladding and waterproofing are the two areas insurers question most closely.
Claims we are commonly asked about
Balcony membrane fails after handover
Water tracks into the units below two years after completion on a design-and-construct job where the builder took responsibility for the waterproofing detail. The owners corporation claims rectification and loss of amenity, and the dispute turns on whose design responsibility that detail was under the contract.
Product substituted on site
A specified cladding or window system is swapped for an alternative to hold the program, and the substitution does not satisfy a later compliance review. Removal and rectification costs typically dwarf the original saving, and the decision to substitute is generally treated as a professional one rather than workmanship.
Budget advice an owner relied on
A builder gives an owner a cost estimate for a renovation that lands well over, and the owner argues they would never have proceeded on the real figure. Claims of this type generally sit with professional indemnity rather than with the home warranty scheme or the public liability policy.
Worth confirming in the wording
- Worth confirming whether the policy contemplates the cost of rectifying your own defective work or responds only to the resulting damage, because that split varies significantly between builder wordings.
- Worth confirming how combustible cladding and waterproofing are treated, since insurers commonly apply specific conditions, sublimits or exclusions to both.
- Worth confirming whether design work you subcontract to an engineer, designer or certifier is contemplated if that consultant turns out to be uninsured or has wound up.
Common questions
Does home warranty insurance mean I do not need professional indemnity?
They do different jobs. State home warranty and domestic building schemes are there to protect the owner if you die, disappear or become insolvent, and the insurer can generally pursue you afterwards. Professional indemnity responds to claims that a design, specification or advisory decision you made caused loss, which those schemes are not designed to cover.
Do I need it if I never do design work?
If you build strictly to someone else's documentation the exposure is lower, but it rarely reaches zero. Site decisions, product substitutions, engineering coordination and cost or program advice all involve professional judgement. Many head contracts and government or commercial jobs also specify a professional indemnity limit before you can be engaged at all.
What does builder professional indemnity cost?
It depends on the profile rather than a fixed rate. Insurers look at licence class, annual turnover and typical contract values, the proportion of design-and-construct work, exposure to residential apartments and cladding, subcontractor arrangements and claims history. Turnover and the amount of design responsibility you accept usually move it the most.
Will it cover defect rectification on my own build?
That is the clause to read carefully. Many wordings respond to the loss flowing from a design failure rather than to the cost of redoing your own work, and some include a limited rectification extension. The answer sits in the policy wording and any endorsements, so it is worth confirming before a job rather than after.
General information only. Cover, limits and exclusions depend on the PDS, TMD, eligibility, underwriting and the policy terms. See professional indemnity insurance for the wider picture.
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