Search for insurance help
Why is Combined Liability Insurance Important?
In certain industries—especially high-risk sectors such as mining, construction and engineering—businesses often find themselves in a unique position. They sell or build a product but are also tasked with designing a unique solution that goes beyond the scope of the product itself. For example, imagine a mining contractor selling heavy machinery while also being responsible for designing a complex operational system that integrates that machinery into the client’s production line: you sell the machinery, but your design of the architecture of your machinery isn’t charged as a separate fee.
When these two roles—selling a product but designing a separate solution that is not specifically charged for, exposes you to a wide array of risks. Should the design fail, the consequences can be severe: expensive downtime, financial losses and even legal action. Worse yet, you may not be covered for these losses under a standard insurance policy since you are not covered for design services.
This is where Combined Liability Insurance comes into play. Without this specialised form of insurance, businesses can find themselves navigating an insurance gap that leaves them vulnerable to catastrophic financial risks.
In this article, we’ll explore what Combined Liability Insurance is and how it helps protect against significant financial exposure.
What Is Combined Liability Insurance?
Combined Liability Insurance merges the coverage of Public Liability Insurance and Professional Indemnity Insurance, offering comprehensive protection for businesses that face a unique risk profile—those that sell products but may design solutions to certain challenges as distinct parts of their operations.
Here’s the key issue: when you sell a product, Public Liability Insurance protects you if the product causes property damage or injury. However, if you also design a solution separate from the product—such as a production line, workflow system or operational process—Professional Indemnity Insurance would typically cover you in the case of a design error.
But if you’re not charging a separate fee for the design work, it’s often difficult to obtain standalone Professional Indemnity Insurance.
This creates a gap where neither your Public Liability nor Professional Indemnity policies may cover you in the event of a design failure.
QUESTIONS? JUST ASK
Tony Venning
Combined Liability Insurance fills this gap by providing coverage for both public liability (third-party injury or property damage) and design-related risks (financial losses due to design errors), ensuring you’re fully protected.
Why Do You Need Combined Liability Insurance?
Let’s consider a mining contractor who sells mining equipment to a client. The sale of the equipment is covered under a standard Public Liability Insurance policy. However, the contractor is also tasked with designing a bespoke operational system to integrate that machinery into the mining site—a service that’s essential for the equipment to function properly but is not charged as a separate design service.
If the contractor’s design is faulty, resulting in financial losses for the client, the Public Liability Insurance provider may deny the claim, stating that the issue stems from the contractor’s professional services (i.e., the design), not the product sold. Similarly, without a separate charge for the design work, the contractor may not be eligible for Professional Indemnity Insurance, leaving them exposed to potentially massive financial liabilities.
In such cases, a Combined Liability policy ensures that both aspects of the business—selling the product and providing design services—are protected. Without this dual coverage, a business could face claims from the design failure that neither policy (public liability or professional indemnity) would cover.
Key Scenarios Where Combined Liability Insurance Is Crucial
Design and Construct: If your business is involved in both the physical construction of a project and the design of systems or processes within that project, Combined Liability Insurance is essential. For instance, a contractor responsible for building a processing facility may also need to design an internal safety or production system. A failure in this design could lead to costly operational shutdowns.- Non-Fee Design Services: If you offer design services but do not charge a fee for them, securing standalone Professional Indemnity Insurance can be challenging. Without charging a specific fee for the design work, many professional indemnity insurers won’t cover you, leaving a significant gap in your coverage. Combined Liability Insurance bridges this gap by covering your design work even if it is not a separate, chargeable service.
- High-Impact Industries: In industries like mining, engineering and construction, the stakes are high. A design error can result in significant operational downtime, leading to multimillion-dollar losses. Whether you’re designing a workflow, safety system, or integrating machinery, the potential for financial damage is vast. Combined Liability Insurance helps ensure your business is protected from all angles, minimising the risk of devastating financial consequences.
QUESTIONS? JUST ASK
Tony Venning
How Combined Liability Insurance Protects You
When a business sells a product and provides a separate design service, both Public Liability and Professional Indemnity risks are at play. Without a combined approach, a business could face claims from both sides that leave it financially exposed.
Public Liability Coverage: This protects you from claims arising from property damage or injury caused by the products you sell. If someone is injured or property is damaged due to the product, public liability insurance steps in to cover the costs.- Professional Indemnity Coverage: This covers your business for claims arising from design errors or professional services that result in financial losses for your client. For example, if your design causes operational downtime, professional indemnity insurance would normally cover the costs of the financial loss.
- Combined Coverage: By combining both forms of insurance, you ensure that you’re protected from both product-related claims and design-or-service related claims. This is crucial for businesses that provide a design service alongside the product they sell, especially if the design service is not charged separately.
The Risks of Not Having Combined Liability Insurance
Failing to have the proper insurance in place could have devastating consequences for your business. Let’s say your design for integrating heavy machinery into a mining site fails, causing the entire production process to halt.
Without Combined Liability Insurance, your Public Liability Insurance provider could argue that the failure is a result of your professional services (the design), and therefore not covered under the policy. Simultaneously, without a Professional Indemnity Insurance policy in place (because you didn’t charge a separate fee for the design), you could find yourself facing a claim that neither policy will cover.
This gap in coverage could leave you responsible for massive financial losses, not only from the client’s operational downtime but also potentially from legal action. In industries where millions of dollars are on the line, such an oversight could lead to business insolvency or severe reputational damage.
Why You Need a Good Business Insurance Brokers
Navigating the complexities of Combined Liability Insurance requires expert guidance. You can invest in a Combined Liability solution, but you need a solution tailored to your specific business. Further, you need a proactive broker who will help you stay on top of not only the ever-changing needs of insurers, but also your ever-evolving business structure.
QUESTIONS? JUST ASK
Tony Venning
That’s where brokers like the team at Crucial Insurance and Risk Advisors come in. With years of experience in high-risk industries, Crucial Insurance can help tailor a policy that fits your unique needs, ensuring that your business is fully protected from all possible angles—no matter the market.
At Crucial Insurance, we understand the intricacies of combined liability and work closely with clients to ensure they are not left exposed to unnecessary risks. Whether you’re in mining, construction or another high-risk sector, we’re here to help safeguard your business and give you peace of mind.
Conclusion: Protect Your Business with Combined Liability Insurance
For businesses that sell products while also offering design services, Combined Liability Insurance is not just a safety net—it’s a necessity. The complex nature of these dual roles creates unique risks that traditional Public Liability or Professional Indemnity Insurance policies may not cover.
By opting for a Combined Liability Insurance policy, you protect your business from both product-related claims and design-related risks, ensuring that you’re covered from all angles. This is especially important for businesses that do not charge separately for design services, as standalone Professional Indemnity Insurance may not be available to you.
For more information on Combined Liability Insurance, contact Crucial Insurance today. We’re here to help.
Important Disclaimer – Crucial Insurance and Risk Advisors Pty Ltd ABN 93 166 630 511. This article provides information rather than financial product or other advice. The content of this article, including any information contained on it, has been prepared without taking into account your objectives, financial situation or needs. You should consider the appropriateness of the information, taking these matters into account, before you act on any information. In particular, you should review the product disclosure statement for any product that the information relates to it before acquiring the product.
Information is current as at the date articles are written as specified within them but is subject to change. Crucial Insurance, its subsidiaries and its associates make no representation as to the accuracy or completeness of the information. All information is subject to copyright and may not be reproduced without the prior written consent of Crucial Insurance.
General Advice Warning: This advice is general and does not take into account your objectives, financial situation or needs. You should consider whether the advice is appropriate for you and your personal circumstances. Before you make any decision about whether to acquire a certain product, you should obtain and read the relevant product disclosure statement.
All information above has been provided by the author.
All information above has been provided by the author.
Tony Venning, Crucial Insurance and Risk Advisors, ABN 93 166 630 511, AFSL 451450
This article originally appeared on Crucial Insights and has been published here with permission.
Related articles
QUESTIONS? JUST ASK
Log in with Google
