Contractor and Subcontractor Liability for Australian Businesses: Junior Agents, Yard Staff and Buyer's Agents

Businesses routinely engage contractors – junior selling agents on commission, casual yard staff, buyer's agents and aerial photographers. A look at where the liability for their conduct sits and how the business's policies respond.

Businesses engage a much broader range of contractors than the headcount suggests. Junior selling agents working on a commission-only basis. Casual yard staff brought in for sale days. Buyer's agents who refer purchasers and share commission. Aerial photographers and videographers. Stock handlers, livestock transport operators and clearing-sale assistants. Each of these relationships sits somewhere on a spectrum between employment and an arms-length contract.

When a contractor causes a loss – to a client, to a third party, or to the business itself – the question of which policy responds depends on how that contractor was engaged, not how the business informally describes the relationship.

The default position on most business policies

Most business Professional Indemnity and Public Liability policies define the insured as the entity, its directors, its officers and its employees. Contractors are sometimes captured by an extension, but the extension generally requires that the contractor was acting under the business's direct supervision and control, was not engaged in their own independent business, and was not entitled to be insured under their own policy.

That definition fits a casual yard hand engaged for one sale day. It does not fit a junior selling Agent on commission, a buyer's Agent or an independent aerial photographer. Those parties are running their own businesses, and the assumption that the business's policy responds to their conduct is the one most commonly tested in practice.

Junior selling agents on commission

Junior selling agents on a commission-only arrangement are a particularly common gap. The business typically holds the client relationship, the brand and the authority to sell, but the Agent is engaged as a contractor – often through their own company or sole trader structure – and is paid by commission share.

“The business takes the reputational hit and often the legal claim. Whether the business's policy answers depends on how the contractor was engaged, not how the business thinks of them internally.”

When a vendor or purchaser later brings a Professional Indemnity claim arising from that Agent's conduct, the business is the named respondent. The business's Professional Indemnity may or may not respond, depending on the wording, and the junior Agent's Professional Indemnity may or may not respond, depending on whether they hold one and how it is structured. The clean position is for the engagement contract to require the Agent to hold their own Professional Indemnity naming the business, and for the business's own Professional Indemnity to confirm that contractors of that type fall within the definition.

Buyer's agents and referral arrangements

Buyer's Agent relationships have grown rapidly in Australian property. Where an agency works with buyer's agents on referral or sub-business arrangements, the conduct of the buyer's Agent can give rise to disputes that name the listing business. Professional Indemnity wordings vary substantially in how they respond to these relationships, and the engagement documentation between the parties is generally the controlling document.

Casual sale-day and yard staff

Casual staff engaged on sale days sit at the other end of the spectrum. They are usually directly supervised, performing a defined task, and not engaged in their own business. The business's Public Liability typically responds to their conduct, and workers compensation should be in place for the period of engagement. The most common gap is that workers compensation arrangements assume the work is being performed by employees, and the casual classification is not always notified to the workers compensation insurer.

Aerial photographers and specialist contractors

Specialist contractors – aerial photographers, videographers, stylists, marketing businesses – should be holding their own Public Liability and, where relevant, aviation cover. The business should hold a current certificate of currency and, for higher-value engagements, an indemnity from the contractor in favour of the business. The business's own policies are then the secondary responder, not the primary one.

What we look at when we review the policy

When we review an agency program with meaningful contractor use, the conversation focuses on a few specific items. Whether the Professional Indemnity and Public Liability wordings respond to contractors of the type the business engages, not only to a narrowly defined supervised contractor. Whether the engagement documentation requires the contractor to hold appropriate insurance naming the business. Whether workers compensation arrangements reflect the workforce including casuals. Whether sub-business and buyer's Agent arrangements are documented in a way that supports the wording. And whether the limit selected reflects the work the contractors perform, not only the business's own staff activity.

Contractor relationships are now central to how businesses operate. The insurance program behind them should be set up to reflect that, not to assume an older, employee-only model.

If you would like a review of how contractor and subcontractor exposures are arranged in your business program, we are happy to walk through it with you.