White Collar Professionals (Engineers, Building Designers):

You’re focused on delivering excellent professional services to your clients. But when you engage subcontractors, whether for design input, specialist expertise, or installation, your risk exposure can change significantly.

Blue Collar Professionals (Builders, Trades):

Working with subcontractors is often a necessity to get the job done. Yet if something goes wrong, you can be held responsible, even when you didn’t do the work yourself.

This guide will help you understand:

• Your duty of care to clients and third parties
• The legal concepts of proportionate and vicarious liability
• Why your insurance may not automatically cover subcontractor-related claims
• What you can do to protect your busines

Duty of care is your legal obligation to exercise reasonable skill and diligence to avoid harm or loss.

White Collar Professionals: Your duty can extend beyond your client, encompassing anyone who relies on your advice, plans, or specifications.

Blue Collar Professionals: Your duty includes ensuring safe practices, verifying subcontractor compliance, and delivering work that meets applicable codes and standards.

Breach of Duty Example: A subcontractor incorrectly installs wiring, resulting in a fire. Even if you weren’t physically involved, you may be found in breach of duty if you didn’t appropriately supervise, specify, or check the work.

Proportionate Liability refers to the legal principle where each party involved in causing harm or loss is held liable only for their proportionate share of responsibility, rather than jointly and severally liable for the entire loss.

This concept aims to allocate liability fairly among parties based on their degree of fault or contribution to the harm.

Why This Matters:

• You are not automatically protected because others contributed to the problem
• You must identify and bring in other responsible parties to share liability
• Without clear records and contracts, you may end up carrying more of the burden than is fair

Vicarious liability refers to the legal responsibility imposed on one party (typically an employer or principal contractor) for the actions or omissions of another party (usually an employee or contractor) who acts on their behalf.

Important Clarification: Even if your subcontractor is an independent contractor on paper, courts will look at the real nature of the relationship:

• How much control you had
• Whether they acted as an extension of your business
• Whether you effectively stepped into their role

Many business owners and professionals assume subcontractors are fully responsible for their own work.

The reality: If you directly contract a subcontractor as part of your service to a client, you may be held responsible, and your insurance policy may not respond unless set up correctly.

Examples of Exposures:

• A subcontractor causes a water leak, fire, or injury and has no insurance (or inadequate insurance)
• Your own insurance classification doesn’t reflect the true nature of your activities
• You assumed your policy automatically covered subcontracted work

Outcome: The claim falls back on you, even though you didn’t personally do the work.

Here are practical steps you should take before engaging subcontractors or trades:

• Avoid Direct Engagement Where Possible: If appropriate, have the client directly engage specialist contractors. This can remove you from the contractual chain of liability.
• Review and Update Your Insurance: Notify your insurance broker if you engage subcontractors. Your occupation classification may need to be updated. Confirm whether your policy covers liability for subcontracted work.
• Verify Subcontractors’ Credentials & Insurance: Obtain Certificates of Currency for their Public Liability Insurance. Ensure they hold all required licences, registrations, or qualifications.
• Use Written Contracts with Clear Scopes: Define exactly what work the subcontractor is doing. Include indemnities, limitations of liability, and responsibility for compliance.
• Maintain Oversight & Records: Regularly monitor work progress. Keep thorough records of inspections, communications, and signed agreements.
• Understand Your Vicarious Liability: Recognise that engaging subcontractors doesn’t automatically shift risk away. Be proactive in managing how their work integrates into your services.