Insurance Clause in a Contract or Lease: Terms Explained

Decode your insurance clause.

Tick the terms your contract, tender, permit or lease asks for, or paste the clause and they’re ticked for you. Each one is explained in plain words, and the list becomes a summary you can copy or hand to a broker.

The decoder explains common terms in general. It doesn’t tell you what your contract means or whether your policy meets it. A licensed or authorised broker can check the policy, and a lawyer can advise on the contract.

How much liability insurance a clause asks for.

The dollar figure is the policy’s limit of liability: the most the insurer pays. Who asks for which figure is usually set by their own template; licence minimums are the exception.

“Any one occurrence” Public liability is usually written per occurrence. Vero pays “up to the ‘Public Liability’ limit of liability specified in your policy schedule” for the liability “resulting from an occurrence”, and a series of occurrences from one original cause “will be deemed to be the one occurrence”¹. So the limit applies to each separate event, and several unrelated claims in a year can each be paid up to it.
“In the aggregate” One total for the whole policy year. Products liability is normally written this way: Vero pays its products limit “in total for all occurrences” in the period of insurance¹, and the Tasmanian Treasury’s 2011 contract guideline notes that product liability “is on an aggregate annual basis, not per claim”¹². The NSW Government’s Procure IT agreement asks for public liability of at least $10 million “in respect of each claim and for the total aggregate liability for all claims”⁴.
Products liability The part of the policy that responds to injury or damage caused by something the business sold, supplied, made or repaired. Insurers often combine the two covers as “public and products liability”, which is what the City of Melbourne asks to see on a certificate⁵.
What the figure doesn’t tell you A certificate showing the limit “does not mean that those limits have not been depleted or exhausted by claims made during the policy period”, the Department of Defence told its contract managers in a 2014 guidance note⁸.

Who asks	Public liability figure
NSW Government contracts	$10 million by default for public liability, and $10 million for products liability if required². The NSW Procurement Board tells agencies to impose “the minimum possible levels” on small and medium businesses, and to ask for the certificate at contract award, not at tender³
Queensland Government building work	$20 million if the contract annexure leaves the amount blank¹⁴
Tasmanian Government templates	$20 million for public liability and $10 million for professional indemnity by default¹²
Councils, permits in public space	At least $20 million for a single claim at the City of Melbourne⁵; a $20 million minimum for footpath trading at Blayney Shire⁶
A WA council’s minor works contract (2010)	$10 million for public liability, and $10 million for products liability any one occurrence¹⁷
QBCC commercial subcontract template	At least $10 million if the schedule leaves the amount blank¹⁶
Trade licences	At least $5 million for a Queensland electrical contractor licence⁷
A commercial lease template	$20 million of “public risk insurance” in the Commonwealth’s national lease, with a note to change it if a different amount is agreed³⁰

The buy.nsw guidance warns buyers not to make insurance obligations “so onerous that it acts as a deterrent”². Published costs for these limits are on our public liability insurance page.

Who the insurance policy covers.

Several terms in a clause are about extending the business’s policy to the other party. They do different things, and none of them doubles the limit.

Principal’s indemnity An extension covering the principal, the person the business has a written contract with, when they’re sued because of the business’s work. Vero extends its liability cover to a principal only for injury or damage that “arises directly from your negligence in the performance of the contract”, and only “to the extent the cover under this Additional Benefit is required by the contract”. It doesn’t cover the principal’s “own negligence, acts, errors or omissions”, anything that “arises independently” of the contract, or anything a workers’ compensation policy covers¹. Defence asks for certificates to show “the Commonwealth is insured for its vicarious liability” where the contract requires it⁸.
Cross liability Where more than one party is insured on the same policy, each is treated as if it had its own. Main Roads WA’s wording treats each insured “as a separate and distinct unit”, “as if a separate Policy had been issued to each of them in their name alone”, while “nothing in this Condition shall be deemed to increase the Limit of Liability”¹¹. Vero’s joint insureds condition says the same¹. The QBCC subcontract asks for public liability “which includes a cross-liability provision”¹⁶.
Severability of interests The other half of the same idea: one insured’s breach or knowledge isn’t held against the others. Vero’s management liability section puts it as “a breach of this Policy Section or knowledge or information possessed by one of you will not be imputed to another”¹. The contracts on this page ask for it in the cross liability form above rather than by this name.
“In the joint names of”, or “named as an insured” The other party is a policyholder in its own right, not just noted. A WA council’s contract lets the principal require that it be shown “as a Joint Named Insured under some or all of the Insurances”¹⁷, and the Commonwealth lease template offers a policy “in the joint names of the Landlord, the Tenant and such other persons as the Landlord may reasonably require”³⁰. On a head contractor’s policy, a subcontractor gets the benefit only where the contract between them “require[s] the Insured to effect insurance coverage of this type on behalf of the subcontractor”¹¹.
Interested party, or “note the interest of” The council, landlord or client is recorded on the policy and shown on the certificate. What that gives them depends on the wording. Vero extends cover to an interested party for liability “that arises directly from your negligence”, as far as the contract requires, and not for their own negligence; an interested party that is also a principal gets the principal’s cover instead¹. The Insurance Contracts Act gives a third party beneficiary a direct right to recover from the insurer “in accordance with the contract”¹⁰, but a bare notation can give nothing: a NSW court has said that “without more, such a notation would give a third party no rights under the policy”, and whether the Act’s right applies depends on the policy wording, as one law firm notes³². The City of Melbourne wants to be “named as an interested party for their respective rights and interests under the policy”⁵. More on the certificate side in what a certificate of currency shows.

A certificate on its own gives the person holding it nothing: Comcover’s certificate for Defence “is issued as a matter of information only and confers no rights upon the certificate holder”⁹.

What a waiver of subrogation does.

Subrogation is the insurer’s right to recover what it paid from whoever caused the loss. A waiver gives that right up against a named party.

Subrogation After paying a claim, an insurer can usually take over the insured’s right to recover from whoever caused the loss. That right comes from the general law, not from a statute. The Insurance Contracts Act limits it: section 65 stops subrogation against uninsured family members and permitted drivers, and section 66 stops it against an insured’s employees for conduct in the course of employment that wasn’t serious or wilful misconduct¹⁰. Those limits matter when a contract asks for a waiver.
Waiver of subrogation “If there is a waiver of subrogation, the insurer has waived (that is, given up) the right to pursue a nominated party”, one law firm puts it³³. Main Roads WA’s policy waives recovery against anyone the insured “shall have agreed in writing to waive their rights to recovery” with, as long as the agreement came “prior to the Occurrence”¹¹. Vero waives subrogation between the parties insured on the one policy¹.
Where it’s asked for The QBCC subcontract wants a cross liability term “where the insurer waives all right of subrogation or action” against anyone named as an insured¹⁶. The Commonwealth lease’s third option is to note the tenant’s interest on each policy and have the insurer waive “its rights of subrogation against the Tenant”³⁰.
The catch Agreeing in a contract to give up recovery rights can itself fall outside the policy. Vero excludes liability “for any amount you are unable to recover because of a contract or agreement that you have entered into which excludes or limits your rights to recover that amount”¹. A waiver doesn’t give the principal cover; it stops the insurer chasing them.

Contract promises and your insurance policy are different things.

An indemnity clause sits in the contract. Whether a policy pays for it is a question for the policy wording.

Indemnify, and “hold harmless” An indemnity is “the promise to pay for any loss which the other may suffer”, and an indemnity clause “is a contractual risk transfer”, in the Tasmanian Treasury’s glossary; hold harmless means “one contracting party is to assume the liabilities of the other” when a third party claims¹². In Australian contracts the two words are often used together, and “the bigger issue isn’t the label – it’s the scope of what you’re promising”³⁵.
What one looks like The Victorian Department of Education’s mandatory clause has the contractor indemnify the State and the school council “against all claims, liability or expenses (including legal costs)” for injury, loss or damage “caused (or to the extent contributed) by any act or omission of the contractor”, except where the loss “is directly attributable to the negligence of the State”¹⁹. The State doesn’t have to pay anything first before enforcing it¹⁹.
Liability “assumed under contract” Vero’s contractual liability exclusion removes cover for “any liability assumed under any contract or agreement”, except liability “which would have been implied or imposed by law in the absence of such contract”, contracts listed in the schedule, and written leases of real property that don’t oblige the business to insure the property. Even under the lease exception it won’t pay for an indemnity covering an act “for which [the other party] is wholly responsible”, unless the law would have imposed that liability anyway¹. The principal’s indemnity and interested party benefits are carved out of the exclusion¹. Whether an insured “would have been liable in absence of such agreement” was the question in a 2018 NSW Court of Appeal case about warranties and an indemnity the insured had given a third party³⁶.
Insurance doesn’t change the promise “The effecting of insurance does not limit or expand the liabilities or obligations of the Contractor”, the NSW Procure IT agreement says⁴. The WA Government’s small business agency warns tenants that lease indemnity clauses “can breach your insurance policy” and suggests discussing insurance clauses with the insurer before agreeing to them²⁹.

Some contracts also try to make you liable for more than your share of a loss. Your policy may not cover that extra share. A lawyer can tell you what a clause means for you.

Professional indemnity clauses.

Consulting, design, IT and services contracts add professional indemnity, and because it’s claims-made cover, they say how long to keep it.

Claims made A claims made policy “responds to claims made during the period of the insurance”, and professional indemnity policies “are usually claims made policies”¹². The retroactive date is the date “on or after which acts or omissions are covered”³⁴. Defence wants a professional indemnity certificate to show the retroactive date and how the policy defines professional services⁸. See claims made vs occurrence.
Maintain for years after completion A claim about this year’s work can arrive years later, which “is why the contract wording may require such policies to continue for a specified period (known as ‘run off’ insurance)”¹². Run-off cover is “cover for claims made after the insurance policy has ended that have arisen from the acts or omissions of the insured during the period of insurance”³⁴.
How long the published contracts say 4 years after the last contract period in NSW’s Procure IT, with at least $1 million of cover⁴, and 4 years after the contract ends for claims made policies in Queensland’s ICT conditions¹⁵. 6 years after completion in Queensland’s medium works conditions¹⁴, by default in a Tasmanian council’s AS 4902 annexure¹³, and as the Tasmanian Treasury’s normal expectation¹². Up to 7 years after the goods or services, if requested, in the Victorian Government’s guide¹⁸. The Victorian Department of Education asks for $5 million “per any one event and in the aggregate”¹⁹.
Not automatic ASIC’s minimum policy terms for financial services licensees note that automatic run-off cover is not required “as it is not currently available in the market”³⁴. A certificate showing professional indemnity today says nothing about whether cover will exist when a claim arrives years later^{8, 12}.

Other insurance coverage a clause asks for.

Workers’ compensation and contract works insurance turn up beside public liability in building and services contracts.

Workers’ compensation “as required by law” Compulsory for most employers under each state’s scheme, so the clause asks for it to be held where the law requires: Procure IT wants it “in accordance with applicable legislation for all the Contractor’s employees”⁴, and the QBCC subcontract wants whatever the Queensland Act requires¹⁶. Because the law sets the policy’s terms, Defence treats the statutory certificate as “generally sufficient evidence”⁸. See who needs workers’ compensation.
Why head contractors care In NSW, if a contractor has no policy when one of its workers is injured, the principal “is … liable to pay any compensation under this Act which the principal would have been liable to pay if that worker had been immediately employed by the principal”²², and principal contractors sign a declaration that workers compensation premiums have been paid²³. In Western Australia “both the principal and the contractor are taken to be employers of the worker” and are “jointly and severally liable” where the work is part of the principal’s trade or business, though the principal can recover the full cost from the contractor^{20, 21}. A WA council’s contract accordingly asks for insurance that will “adequately protect the Contractor and the Principal” for compensation to the contractor’s and subcontractors’ employees¹⁷. In Victoria, a contractor who is a deemed worker claims on the hirer’s WorkCover registration, and what the hirer pays them counts towards its premium²⁴.
Contract works (construction) insurance It “covers a building or other structure during the course of its construction or erection”, and may extend to plant and equipment on site¹². The contract says who takes it out: Queensland’s medium works conditions make the contractor insure the works “against loss or damage resulting from any cause whatsoever” until it stops being responsible for them, unless the annexure says otherwise¹⁴, and the AS 4902 annexure a Tasmanian council uses picks “Alternative 1” of the two the Standard offers, one with the contractor insuring and one with the principal¹³. Under Main Roads WA’s policy, for example, a subcontractor is covered only where the contract requires it. Other policies differ¹¹. Our guide explains what contract works insurance covers and who takes it out.

Lease clauses.

A commercial or retail lease splits insurance between landlord and tenant, and the retail leases Acts regulate what the landlord can pass on.

The landlord insures the building The Commonwealth’s lease template has the landlord “take out and maintain” building insurance, public risk insurance and plate glass insurance³⁰. The NSW Small Business Commission says “it is common for tenants to contribute towards building insurance premiums whilst they are in occupation”, agreed before the lease starts²⁷.
Premiums as outgoings The NSW Retail Leases Act counts a lessor’s “premiums or charges payable by the lessor because the lessor is the owner or occupier” among outgoings²⁵, and Victoria’s Act does the same, but a Victorian tenant pays only the outgoings the lease itemises, and nothing until the landlord gives the required estimate²⁶. Queensland retail shop landlords can recover their insurance costs, but not loss-of-profits premiums or the excess on a claim on their own policy^{28, 38}.
The tenant’s own policies “The lease may include a provision requiring the lessee to take out certain insurance policies. Check these provisions and obtain quotes”, the NSW guide says²⁷, and WA’s small business agency notes landlords may require tenants to insure “damage to the building and public liability”²⁹. Vero’s contractual liability exclusion doesn’t apply to liability under a written lease that doesn’t oblige the tenant to insure the property¹.
Plate glass “Insurance for all damage and breakage to all plate glass within the Building for the full replacement value”, in the Commonwealth lease’s definition³⁰. In Victoria the two common lease forms “do not require the tenant to be insured for glass breakage”, and the landlord’s glass policy and claim excesses are recoverable as outgoings³¹.
Not voiding the landlord’s insurance “The Tenant agrees not to do anything which renders void or voidable the Landlord’s insurance”, once the landlord has shared its policy terms; the landlord in turn warrants that the permitted use doesn’t void its cover³⁰.
Noting an interest, joint names or a waiver The same template offers three ways to cover the other party: policies in the landlord’s name, policies in joint names, or noting the tenant’s interest with a waiver of subrogation against the tenant³⁰. See commercial landlord insurance for the landlord’s side.

Evidence and timing.

Every clause ends the same way: keep the cover for the whole contract and prove it when asked.

Maintain for the duration Queensland’s medium works conditions require the contractor to “maintain the insurance policies required by this clause for the duration of the Contract and produce evidence of insurance, if requested”, and failing to give evidence of insurance “will constitute a substantial breach of the Contract”¹⁴. Queensland’s ICT conditions add that the supplier “must promptly notify the Customer if any policy is cancelled or there is any significant change”¹⁵. A permit works the same way: the certificate “must be kept current for the life of the permit”⁵.
Within how many days 5 business days of a written request under the QBCC subcontract¹⁶; 7 days if the tender doesn’t say otherwise at one WA council¹⁷; 30 days of the start of the term and of any request under Procure IT, as “a certificate of currency issued by its insurer or insurance broker” confirming the policies are current and have the required limits⁴; and simply “on request” in Queensland’s ICT conditions¹⁵.
Certificate of currency “It is only evidence that a policy is in force as at the date the certificate has been issued”, and because most policies renew yearly, “it may be necessary to obtain certificates of currency each year”⁸. A 2012 Victorian Government checklist tells contract managers to request updated certificates at least four weeks before expiry³⁷. What a certificate shows, and how to get one, is in our certificate of currency guide.

What an insurance clause looks like in a subcontract.

The QBCC’s commercial subcontract template, used between Queensland head contractors and subcontractors, has most of the terms on this page in a few lines.

15.1 By the Start Date, the Subcontractor must, at its own cost, effect and maintain the following insurances: (a) all insurance required for the Subcontractor to comply with the Workers Compensation and Rehabilitation Act 2003 (Qld); and (b) public liability insurance with a reputable and financially sound insurer upon usual and reasonable terms which name as an insured the Contractor and the Subcontractor for their respective rights: (i) covering against any liability for personal injury or death to a person, or damage to property, arising out of, or otherwise in connection with, the Subcontractor carrying out the Works; (ii) for at least the amount specified in Item 15 of the Subcontract Schedule in respect of any one event and in aggregate; and (iii) which includes a cross-liability provision or term where the insurer waives all right of subrogation or action that the insurer may have against any of the persons named in the policy as the insured.

15.2 If the Contractor gives to the Subcontractor a written request for documentary evidence that the Subcontractor has effected and maintained the insurance required in accordance with this clause, the Subcontractor must within 5 Business Days give to the Contractor such documentary evidence.¹⁶

Read with the decoder: workers’ compensation as the law requires; public liability naming both parties (joint names) for a limit that applies per event and in the aggregate; a cross liability term; a waiver of subrogation; and evidence within 5 business days. Paste your own clause to see the same breakdown.

FAQ

Common questions.

What is a waiver of subrogation?

After an insurer pays a claim, it can usually step into the insured’s shoes and recover the money from whoever caused the loss. That right is called subrogation. A waiver of subrogation is the insurer agreeing not to use that right against a named party, usually the principal or landlord in the contract. It stops the insurer chasing them; it doesn’t give them cover.

What does a cross liability clause mean?

Where more than one party is insured under the same policy, a cross liability clause treats each as if it had its own policy, so one insured party can claim against another. It doesn’t increase the limit: the policy still pays no more than the one limit for any one occurrence.

What is principal’s indemnity in insurance?

An extension in a public liability policy that covers the person the business works for (the principal) if the principal is sued because of the business’s negligence. In Vero’s wording it applies only as far as the contract requires, and not to the principal’s own negligence or anything that happens independently of the contract.

Is noting an interested party the same as naming them as an insured?

No. An interested party is recorded on the policy and shown on the certificate, and some wordings extend cover to them for liability that comes from the business’s negligence. A party named as an insured, or a policy in joint names, is a policyholder in its own right. A certificate isn’t part of the policy, and on its own it gives whoever holds it no rights.

Does $20 million public liability mean the policy pays $20 million a year?

Usually it’s the most the policy pays for any one occurrence, and several unrelated claims in a year can each be paid up to that limit. Products liability is often written in the aggregate instead: one total for the whole policy year. The policy wording, and usually the certificate of currency, show which.

Is an indemnity clause covered by my public liability insurance?

Not automatically. An indemnity is a contract promise, and many liability policies exclude liability the business only has because it agreed to it in a contract, while still covering what the law would have imposed anyway. The policy wording says what it does and doesn’t cover, and a licensed or authorised broker can explain it.

How long do I have to keep professional indemnity insurance after a contract ends?

As long as your contract says. There’s no general rule, only what each contract template asks for. For example, NSW’s Procure IT contract asks for 4 years after the contract ends, Queensland’s medium works contract asks for 6 years where the contractor does design, and Victoria’s guide lets buyers ask for up to 7 years. Contracts ask because professional indemnity responds to claims made while the policy is in force.

Who pays for building insurance in a commercial lease?

Usually the landlord takes out the building policy and recovers the premium from the tenant as an outgoing, where the lease allows it. The retail leases Acts in NSW and Victoria count the landlord’s insurance premiums as outgoings, and Victoria’s Act only lets a landlord recover outgoings the lease itemises. The tenant generally holds its own public liability policy.

Can COVRA tell me whether my policy meets the clause?

No. COVRA isn’t an insurance broker and doesn’t give advice. The decoder and this guide explain what a clause asks for. Whether a particular policy meets it depends on that policy’s wording, and the licensed or authorised broker we put you in touch with can look at the clause and the policy together.

Still have a question? A broker can talk it through with you.

Get a quote from a broker

Covers in this guide.

Our guides to what each cover generally does, what it costs and the rules that apply.

Public Liability Insurance Professional Indemnity Insurance Commercial Property Insurance

Sources.

SME Business Insurance PDS and Policy Wording (V11562), Section 6 Public and Products Liability, Vero, 30 April 2025
Contract clauses: insurance requirements, NSW Government (buy.nsw)
PBD-2023-03 Procurement opportunities for small and medium businesses, NSW Procurement Board, 7 December 2023
Procure IT Framework v3.2, Part 1 Head Agreement, clause 10 Insurance, NSW Government
Public liability insurance, City of Melbourne
Footpath trading, Blayney Shire Council, 23 September 2021
Electrical contractor licence, Queensland, ABLIS (business.gov.au)
Guidance note: insurance certificates of currency, Department of Defence, 2014
Certificates of currency: Department of Defence, Comcover (Department of Finance), 2023–24
Insurance Contracts Act 1984 (Cth), sections 48 and 65 to 67, Federal Register of Legislation, compilation of 1 March 2024
Maintenance liability policy wording, Main Roads Western Australia, 31 July 2025, for the policy period to 30 June 2026
Guidelines for determining appropriate levels of insurance for goods and services contracts, Tasmanian Department of Treasury and Finance, October 2011
Annexure Part A to AS 4902 (tender document), Flinders Council
Medium Works conditions of contract, Queensland Government, April 2026
QITC general contract conditions, ICT products and services, v2026.01, Queensland Government
Commercial subcontract template, clause 15 and schedule item 15, Queensland Building and Construction Commission, October 2020
General conditions of contract for minor works, clause 7, City of Bayswater (WA), 2010
Insurance in procurement: goods and services guide, Buying for Victoria
Contractors: insurance and contract arrangements policy, Victorian Department of Education, 5 December 2025
Contractors and subcontractors, WorkCover WA
Employer FAQs: cover for the contractor’s workers, WorkCover WA
Workers Compensation Act 1987 (NSW), section 20, NSW legislation
Workers compensation for contractors and other non-employee workers in the construction industry, icare, 11 March 2022
Claims manual 2.1.1: define a worker, WorkSafe Victoria
Retail Leases Act 1994 (NSW), section 3A, NSW legislation
Information sheet: outgoings, Victorian Small Business Commission, 20 April 2023
NSW Retail Tenancy Guide 2022, NSW Small Business Commission
Outgoings, and restricted charges in retail leases, Queensland Small Business Commissioner, 2 July 2026
Understanding commercial leases, Small Business Development Corporation (WA)
Commonwealth National Lease suite: short form template, item 19 and clause 16, Department of Finance, September 2025
Damaged glass claims, Real Estate Institute of Victoria
To note or not note an interested party? That is the question, Holman Webb Lawyers, 27 January 2022
Waiver of subrogation in construction insurance, Bell Legal Group, 10 July 2024
Regulatory Guide 126: compensation and insurance arrangements for AFS licensees, key terms, ASIC, November 2024
Indemnify and hold harmless clauses: a practical guide, Sprintlaw, 25 May 2026
QBE Underwriting Ltd v Southern Colliery Maintenance Pty Ltd (2018) 97 NSWLR 459, case note, 6 St James Hall Chambers, 28 March 2018
Contract insurance checklist, goods and services, Victorian Government Purchasing Board, 2012
Retail Shop Leases Act 1994 (Qld), section 7, Queensland legislation, version from 1 August 2025

What does the insurance clause in my contract or lease mean?