An engineering contract may contain liability provisions that are unlimited or do not include an agreed financial cap.
This can create a significant exposure because the engineer’s contractual liability may be much greater than the Professional Indemnity limit they hold.
For example, holding $5 million in PI Insurance does not mean the engineer’s liability is automatically limited to $5 million.
When reviewing liability provisions, engineers may need to consider:
- whether a liability cap applies
- what losses are included within the cap
- whether some liabilities are excluded from the cap
- the value and risk of the project
- the available insurance limit
Professional Indemnity Insurance and contractual liability limits are separate issues.
Where a contract creates significant or unusual liability, engineers should consider obtaining appropriate legal advice before agreeing to it.
For broader guidance on balanced consultant contracts and liability caps, see Consult Australia’s standard contracts guidance.
