Insurance is one of the few products where people spend hundreds or thousands of dollars and never read what they bought. The Product Disclosure Statement — the PDS — sits unread in an email folder, and the assumptions about what’s covered go untested until a claim lands.
When that claim does land, the exclusions section of the PDS becomes the most important document in your business life. Exclusions are the things your policy specifically doesn’t cover. They’re not hidden, but they’re written in insurance language that doesn’t always make intuitive sense to someone who isn’t an underwriter or a lawyer.
This guide walks through the exclusions that appear in almost every Australian public liability policy — what they mean in plain English, which ones are likely to affect you, and which ones you can address by buying additional cover.
What an Exclusion Actually Means
An exclusion doesn’t mean “the insurer might not pay.” It means “the insurer will not pay.” It’s a hard boundary. If your claim falls within an exclusion, the policy doesn’t respond — regardless of how much premium you’ve paid, how long you’ve been claim-free, or how unfair the outcome feels.
Some exclusions are universal across all PL policies. Some are insurer-specific. Some can be bought back — you pay an additional premium to extend the policy to cover something that would otherwise be excluded. But the base position is always: if it’s excluded, it’s not covered.
This is why reading the PDS matters. Not because the insurer is trying to trick you, but because the scope of your protection is defined by what’s excluded as much as by what’s covered.
The Exclusions That Appear in Almost Every PL Policy
Asbestos
This is the most universal exclusion in Australian insurance. Every standard PL policy excludes claims related to asbestos in any form — exposure, removal, disturbance, contamination. It doesn’t matter whether you knew the asbestos was there. It doesn’t matter whether you took precautions. If the claim involves asbestos, the policy doesn’t respond.
Why it exists: Asbestos claims are among the most expensive in Australian legal history, with latency periods of decades and massive compensation awards. The insurance industry collectively decided decades ago that asbestos risk was uninsurable at standard premiums.
Who it affects: Builders, demolition contractors, renovators, plumbers, electricians — anyone whose work might disturb building materials in structures built before the 1990s, when asbestos was widely used in Australian construction.
What you can do: Specialised asbestos liability policies exist but are expensive and limited. The more practical approach is rigorous asbestos identification and management before starting any work on older buildings. If you discover asbestos during a job, stop work and bring in licensed asbestos removalists — who carry their own specialist insurance.
Pollution and Contamination (Gradual)
Most PL policies cover sudden, accidental pollution — a chemical spill that happens in a single incident and is immediately apparent. They typically exclude gradual pollution — contamination that builds up over time, like a slow fuel leak from an underground tank, or chemical seepage into groundwater.
Why it exists: Gradual pollution is hard to detect, hard to measure, and incredibly expensive to remediate. The costs can run into the millions for soil and groundwater cleanup alone, before any third-party injury claims.
Who it affects: Businesses that store, transport, or handle fuel, chemicals, pesticides, or industrial waste. Agricultural businesses, transport operators, manufacturers, and workshops with underground fuel storage are particularly exposed.
What you can do: Environmental liability insurance covers gradual pollution and contamination. It’s separate from PL and more expensive, but essential if your business handles hazardous materials at scale. For smaller operations, spill containment and regular tank integrity testing are practical risk management measures.
Intentional Acts and Wilful Misconduct
Your PL policy covers accidents. It doesn’t cover things you do deliberately. If you intentionally damage someone’s property or cause them harm, the policy doesn’t respond. This extends to acts done with reckless disregard for the consequences — the legal concept of wilful misconduct.
Why it exists: Insurance covers fortuitous events — things that happen by chance. Deliberate acts aren’t fortuitous. They’re choices, and insurance doesn’t insure against bad choices.
Who it affects: Primarily relevant in edge cases. A contractor who cuts corners on safety so severely that a court finds wilful misconduct rather than negligence could find their PL cover voided. This is extremely rare — most claims involve negligence, not wilful acts — but it’s worth understanding the boundary.
Contractual Liabilities Beyond Common Law
Your PL policy covers your liability at common law — the liability that exists under principles of negligence and duty of care, regardless of what your contracts say. It typically doesn’t cover additional liabilities you take on through a contract.
For example: if your client contract says you’ll indemnify the client for any loss from your work, regardless of fault, that’s broader than common law liability. If a claim arises that wouldn’t exist under common law but does exist under your contract, your PL policy might not cover it.
Why it exists: Insurers price your premium based on your legal exposure, not on contractual promises you make to clients. They won’t cover liabilities you’ve voluntarily taken on beyond what the law would impose.
Who it affects: Any business that signs contracts with indemnity clauses — which is most businesses working with larger clients, government, or head contractors.
What you can do: Have your broker or insurer review the indemnity clauses in your key contracts. Some policies include a “contractual liability” extension that covers reasonable indemnities given in written contracts. Ask whether yours does — and if not, what it would cost to add it.
Damage to Property in Your Care, Custody, or Control
This is one of the most commonly misunderstood exclusions. Your PL policy covers damage to third-party property, but typically excludes property that’s in your physical possession or control at the time of the damage.
A practical example: you’re a plumber installing a new $3,000 bathtub in a client’s bathroom. While positioning it, you drop it and it cracks. The bathtub was in your care and control at the time of the damage. Your PL policy might not cover the replacement cost.
Now contrast: you’ve finished installing the bathtub, you’ve left the site, and two hours later a faulty connection leaks and damages the client’s ceiling below. The ceiling damage is covered by PL — it wasn’t in your care or control. But the cost of redoing your own faulty plumbing work might not be.
Why it exists: The insurer expects you to take particular care of property that’s literally in your hands. They also draw a line between “damage to third-party property” (covered) and “the cost of fixing your own defective work” (not covered).
Who it affects: Every trade. Plumbers, electricians, carpenters, painters — anyone who handles client property during installation or repair.
What you can do: Some policies offer extensions for damage to property being worked on, often with a sub-limit. Ask about this. Portable equipment insurance covers your own tools if you damage them, which is separate.
Professional Advice and Services
Your PL policy covers physical injury and property damage. It doesn’t cover financial loss arising from professional advice, design, specifications, or consulting services — even if you provided those services as part of the same job.
If you’re a builder who draws up plans, an electrician who designs a system, or a plumber who advises on water efficiency, your PL policy covers the physical work but not the advice component.
Who it affects: Any trade or business that provides advice or design alongside physical work. This includes most builders, many specialist trades, and any business where clients rely on your professional judgment.
What you can do: Buy professional indemnity insurance for the advice and design component of your work. If you have both PL and PI, the two policies together cover the full scope of your business activities.
Employer’s Liability and Workers’ Compensation
Your PL policy covers injuries to third parties — customers, passers-by, other contractors. It doesn’t cover injuries to your employees or to yourself. Those are covered by workers’ compensation (for employees) and personal accident or income protection insurance (for yourself).
Who it affects: Any business with employees. If a worker is injured on the job, workers’ comp is the primary insurance, not PL.
Aircraft, Watercraft, and Motor Vehicles
PL policies typically exclude liability arising from the ownership or operation of aircraft, watercraft over a certain size, and motor vehicles. These risks are insured separately — aviation insurance, marine insurance, and compulsory third party (CTP) or comprehensive motor vehicle insurance.
The exclusion usually doesn’t apply to loading and unloading of vehicles (covered by PL) or to the use of hand tools and small plant on site. But if you drive a vehicle as part of your business, your PL policy doesn’t cover accidents caused by that vehicle.
Fines, Penalties, and Punitive Damages
Your PL policy covers compensatory damages — money paid to compensate someone for actual loss or injury. It doesn’t cover fines, penalties, or punitive damages imposed by courts or regulators. If WorkSafe fines you $50,000 for a safety breach, your PL policy doesn’t pay it.
Why it exists: Public policy. Courts and regulators impose fines and penalties to deter bad behaviour, and allowing insurance to cover those penalties would undermine the deterrent effect.
War, Terrorism, and Nuclear Risks
Standard PL policies exclude claims arising from war, acts of terrorism, and nuclear incidents. These exclusions are universal across almost all types of insurance and reflect risks that are either uninsurable at scale or covered through government-backed schemes.
For most Australian businesses, these exclusions will never be relevant. But if you work in critical infrastructure, major events, or high-profile locations, you might need specialist terrorism cover — which is available as a separate product.
Exclusions That Vary Between Insurers
Beyond the universal exclusions, insurers differ on what they exclude. Common variations include:
Height limits. Some policies exclude work above a certain height — typically 10 to 15 metres — unless you specifically declare it and pay a higher premium. Roofers, high-rise window cleaners, and telecommunications riggers need to check this carefully.
Underground work. Work below a certain depth, particularly tunnelling and excavation, may be excluded or require a specific extension.
Demolition. Some standard PL policies exclude demolition work entirely or limit it to structures below a certain height. Demolition contractors need specialist cover.
Heat work. Welding, grinding, and any work involving naked flames or high heat may require a “heat work” endorsement on your policy. Without it, fire damage from your work could be excluded.
Subcontractor exclusions. Some policies limit or exclude liability for work performed by subcontractors you’ve engaged. If you subcontract parts of your work, check your policy wording.
Overseas work. Most Australian PL policies cover you anywhere in Australia. Overseas work — even a one-off job in New Zealand or a Pacific Island — may be excluded unless you specifically arrange an extension.
How to Read Your PDS
You don’t need to read the entire PDS cover to cover. The PDS for a standard Australian PL policy can run to 40 or 50 pages. Here’s what to focus on:
- The cover section. What does the policy actually insure? Look for the insuring clause — usually a single sentence that defines the scope of cover.
- The exclusions section. Read every exclusion heading. If it doesn’t apply to you, move on. If it might, read the full text.
- The definitions section. Insurance words don’t always mean what they mean in everyday English. “Occurrence,” “claim,” “personal injury,” “property damage” — these all have specific definitions that shape the scope of cover.
- The claims conditions. What do you have to do when a claim happens? Notification deadlines, cooperation requirements, and claim procedures.
- The limits and sub-limits. Are there caps within the overall cover amount? Some policies have sub-limits for specific types of claims — product liability, pollution cleanup, inquiry costs.
Frequently Asked Questions
What if I don’t understand an exclusion?
Ask your insurer or broker. They’re required to explain the policy terms in plain English. If you’re buying online and can’t get a clear answer, call the insurer’s customer service line and ask. Better to understand an exclusion before you buy than after a claim.
Can I negotiate exclusions?
Generally not on a standard PL policy for a small business. Exclusions are built into the policy wording and aren’t negotiable. What you can do is buy extensions — additional cover that removes or narrows a specific exclusion for an additional premium.
What happens if a claim falls partly within an exclusion?
The insurer will separate the covered and excluded portions of the claim. They pay the covered portion and deny the excluded portion. This is routine and handled by the claims team.
Do all insurers have the same exclusions?
No. While the major exclusions (asbestos, pollution, intentional acts) are universal, the details vary. One insurer might exclude demolition entirely; another might cover it up to a certain building height. Comparing policies means comparing exclusions — not just premiums.
What’s the difference between an exclusion and a condition?
An exclusion says “this isn’t covered at all.” A condition says “this is covered, but only if you do X.” For example, a policy might cover heat work (conditionally) but exclude asbestos (absolutely). Conditions are things you can comply with to maintain cover. Exclusions are hard boundaries.
Should I worry about exclusions that don’t apply to my business?
No. If you’re a home-based consultant and the policy excludes demolition and heat work, those exclusions don’t matter to you. Focus on the exclusions that actually intersect with what you do.
Disclosure: This article contains general information only and does not take into account your individual circumstances. It is not financial advice or legal advice. Policy exclusions, conditions, and coverage vary between insurers and policy types. You should read the Product Disclosure Statement (PDS) for your specific policy and consult your insurer or a qualified professional for advice about your individual insurance needs. This site may earn a commission if you purchase insurance through affiliate links, including BizCover. This does not affect the price you pay.