• Brokers are increasingly being drawn into contract and procurement discussions earlier in projects.
• Poorly allocated contractual obligations can result in uninsured losses and disputes.
• Claims involving documentation failures, coordination breakdowns and workmanship issues are common.
• Underwriters reward disciplined governance and stronger risk management practices.
• Softer market conditions are creating opportunities to negotiate broader and more resilient cover, not just lower premiums.

New Zealand’s construction liability market is becoming more demanding for brokers and insureds alike as rising project pressures, tighter regulation and increasingly layered delivery models reshape client risk profiles.

According to Rebecca Moller, Group Broking Manager, Financial and Professional Risks (Finpro) at Gallagher, brokers are now expected to provide strategic guidance across contracts, governance and operational risk rather than focusing solely on insurance placement.

Large projects, multiple contractors

Moller says many of the pressures now emerging across the sector stem from the way risk is distributed across large projects involving multiple contractors, consultants and suppliers.

“Construction businesses are operating in an environment where responsibilities can become blurred very quickly,” she says.

“When delivery delays, material shortages or design changes occur, disputes often follow because parties have not always fully understood where liability ultimately sits.”

At the same time, she says regulatory reform and stricter building standards are continuing to reshape expectations across the sector.

“Legacy issues such as leaky buildings and non-compliant materials are still influencing insurer and client behaviour today,” Moller says.

“There is far greater scrutiny around governance, accountability and the quality of decision-making throughout the life of a project.”

For brokers, that means client vulnerabilities are no longer confined to traditional professional indemnity or public liability concerns. Instead, contractual risk allocation, governance and documentation practices are increasingly determining whether claims become manageable events or financially damaging disputes.

Poorly structured contracts

Moller says many construction clients remain exposed through poorly structured contracts and obligations that extend beyond what insurers are prepared to cover.

“We continue to see issues caused by scope creep, undocumented changes and contracts that impose obligations beyond insurable standards, such as fitness-for-purpose clauses,” she says.

“Clients can sometimes assume insurance will respond broadly, but there are still major differences between policies, particularly around workmanship issues, completed operations and non-conforming materials.”

She says brokers also need to pay closer attention to how obligations are passed through subcontractor chains.

“Uncapped indemnities and poor flow-down of obligations to subcontractors remain major pressure points,” Moller says.

“In the current economic environment, these exposures are increasingly translating into disputes, financial strain and uninsured loss.”

Changing legal landscape

The changing legal environment is also adding uncertainty for consultants, particularly around long-tail liabilities.

“For example, the 2024 New Zealand Supreme Court confirmed that contribution claims fall outside the 10-year long-stop which has created concern for consultants considering retirement and run-off arrangements,” Moller says.

“This case reinforces the importance of understanding how liabilities may continue long after a project has technically finished.”

Claims costs drag on

Claims costs are also rising and can take years to resolve, particularly where projects are more collaborative and interconnected.

“We’re seeing higher defence costs and more protracted claims because multiple parties are often named in proceedings,” she says.

“Outcomes are becoming more dependent on governance, documentation and clear project accountability.”

Insurers, meanwhile, are responding with greater underwriting  discipline and scrutiny.

Higher-risk engineering disciplines, including structural, fire and geotechnical engineering, continue to attract particularly close attention from insurers assessing contractor design exposure.

“Underwriters are focusing heavily on financial resilience, delivery track record and robust contract risk management,” Moller says.

“While there is still strong competition for well-managed risks, insurers are becoming much more selective about the exposures they are willing to take on.”

Soft market opportunity

Meanwhile, softer market conditions are creating opportunities for brokers who understand how to position quality risks effectively.

“For well-managed clients, we’re seeing greater flexibility in coverage negotiations, including broader terms and, in some cases, pricing improvements,” she says.

“We’re also seeing the re-emergence of long-term agreements for some clients with established insurer relationships.”

Moller says this changing environment is shifting clients understanding of a brokers role from transactional placement to broader advisory support.

“Clients are increasingly looking for support in understanding how contractual obligations interact with insurance,” she says.

“It’s encouraging to see more businesses engaging brokers early to review contracts, identify uninsured exposures and better manage risk allocation before projects begin, although, we do have to ensure the client is clear we can’t provide legal advice, and contracts should also be reviewed by a lawyer.”

Range of covers expand

That broader advisory role is also expanding the range of covers entering construction liability discussions.

“Professional indemnity and public liability remain core products, but environmental liability, statutory liability and cyber cover are becoming far more common parts of the conversation,” Moller says.

“Risk profiles are broadening, and insurance programmes need to evolve alongside them.”

Brokers are also spending more time helping clients improve day-to-day risk practices, including governance, notifications and record-keeping processes.

“In many claims, the outcome depends less on technical arguments and more on what was documented, when it was recorded and how clearly it was communicated,” she says.

“Good governance and disciplined record-keeping can significantly strengthen a client’s position when disputes arise.”

Looking ahead, Moller says one of the sector’s biggest challenges will be keeping pace with the increasing sophistication of modern construction projects while maintaining realistic and insurable risk allocation.

 “We’re seeing increasingly sophisticated builds, but the understanding and allocation of risk isn’t always keeping pace,” she says.

“Contractors and consultants continue to face pressure to accept broader liabilities that the insurance market may not fully support.”

Economic pressures add strain

Economic pressures are also adding strain across the market.

“Rising costs, delays and insolvencies are contributing to higher claim volumes and more entrenched disputes,” Moller says.

“Tightening regulatory expectations are also increasing scrutiny on professional advice and building performance.”

Moller says she hopes delegates at this year’s New Zealand Liability Conference leave with a clearer understanding of how early engagement and disciplined governance can reduce emerging construction risks.

“Insurance doesn’t make up for a bad contract,” she says. “If obligations aren’t clearly defined and insurable from the outset, issues tend to emerge at claim time when options are far more limited.”

“Bringing brokers and insurers into discussions early can make a meaningful difference because it allows cover to align with the actual risk rather than being retrofitted later.”

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