With these advantages come unique risks. Modular projects involve multiple locations, shifting responsibilities, and complex logistics, all of which require insurance programs that truly reflect how you build. If coverage doesn’t align with contractual obligations at each stage, gaps can lead to costly surprises.

As modular construction becomes mainstream, now is the ideal time to review your contracts and insurance strategy to ensure you’re covered from prefabrication right through to practical completion (PC).

Are your contracts being reviewed?

Ensuring your insurance cover starts at the right point in the construction journey begins with a thorough review of your contracts. Every builder operates differently, particularly when it comes to prefabrication, which means the trigger for cover, whether during off‑site manufacturing, transit, storage, or installation, can vary widely.

The key question you need answered is whether your contract works and liability policies protect you from the moment prefabricated components are created right through to PC.

If you own the project site, your ISR or property policy usually covers on‑site activities, and a broad contract works policy can extend that further. Your general liability policy should layer over the top, aligning with operational and contractual risks. When these policies don’t work together, gaps often only appear after a loss.

Are you responsible for your principal’s vicarious liability?

Depending on your contract, you may be responsible for your principal’s vicarious liability, meaning you could be held liable for someone else’s actions if they’re acting on your behalf.

This is common in modular projects. For example, if a manufacturer damages neighbouring property while delivering to site, the principal may still be drawn into the claim. Many principals then push that liability back onto the contractor through broad indemnity clauses.

If your contract requires you to take on the principal’s vicarious liability but your policy doesn’t extend that far, you’ve got a gap, one that could make you responsible for every step of the prefabrication process, from factory floor to final install.

If something goes wrong at the factory, are you covered for a loss of income?

Builders often assume insurance automatically follows the project from prefabrication to PC. But for those builders doing their own pre-fabrication, it’s important that they understand their manufacturing facilities are quite different risks with different insurance requirements.

Events like factory shutdowns, machinery breakdowns, or damage to modules can delay delivery and cause significant business interruption. But loss of income from factory incidents isn’t automatically covered.

Unless your contract works, ISR, or business interruption policy specifically covers off‑site prefabrication activities, you may be left exposed if the factory goes offline.

How to ensure you’re protected

Reviewing your contract is critical to safeguarding your business in modular construction. Prefabricated projects bring unique insurance challenges with multiple locations, shifting responsibilities, and numerous points where things can go wrong. If your contract doesn’t clearly outline who bears the risk at each stage, and your policy doesn’t align with those obligations, you could end up facing unexpected losses.

Our construction team will work with you to conduct a thorough contract review, ensuring your insurance aligns with the way you build. We’ll help close potential gaps before they become costly issues, giving you confidence that your coverage follows the project seamlessly, from prefabrication through to practical completion.

If you have any questions, or would like to review your contract, chat with our experts, John Percey at jpercey@pno.com.au and Adam Bortone on abortone@pno.com.au.

About the expert – John Percey