30th October, 2014

New model laws to affect the distribution of liability for tradies

Tradies who work on larger projects will face a number of risks, from both the nature of their work and from operating on a tight timeframe.

One of these is the question of proportional liability, with a recently tabled law change aiming to clear up confusion around this important issue for smaller contractors. Once implemented, these legal changes could have widespread implications for tradies working as contractors, as well as impacting their public liability insurance cover.

What is proportional liability?

Proportional liability refers to the levels of responsibility that different parties have in the event of a serious claim against their work. This means that the costs incurred are spread across every company involved, based on the amount of responsibility they hold for an issue.

As a result of this spread, a claimant must pursue action against all involved parties concurrently in order to claim all of the costs.

The newly tabled law aims to introduce a national model for the management of this issue, while removing uncertainties around some of the provisions contained in existing legislation. The new measures also include a tool to increase the appeal of early settlement, with one party able to settle with the claimant without incurring contribution claims from other parties who are partially responsible.

Why is this change being made?

Part of the reason for this change is a desire to move from a system where each state has its own proportional liability rules, to one which has national consistency. Of course, any established model laws will still need to be passed and modified by each of the states before it can be implemented. Because of this requirement, it may be some time before new laws come to pass.

Another important aspect which the law change aims to rectify is the ability of larger firms to transfer excessive risks to smaller businesses or contractors in order to avoid greater liability.

There will be some exceptions to the model laws in their current form. For example, these changes to proportional arbitration will not apply to dispute resolution processes unless it has been agreed upon within the contact.

As these changes to liability insurance are implemented across the country, it will be important for companies to get the right advice from their insurance broker. Understanding new legislation and increasing your level of cover if necessary is going to be essential for any tradie.

Author: Murray Bruce