Engineers in New South Wales have owed a statutory duty of care on their construction work since 2020, whether they realised it or not. That duty is now being carried forward into a new Act, and a few recent court decisions have sharpened how it bites. Together, these changes have real implications for how engineers should be insured once the Act comes into effect.
What is a Statutory Duty of Care?
A Statutory Duty of Care is a duty specifically imposed by an Act of Parliament that requires a person or organisation to take reasonable care to protect others from harm.
Breaching a Statutory Duty of Care can result in regulatory penalties, fines, prosecution, or civil liability, depending on the legislation and the kind of breach.
What’s changing, and what isn’t
Engineers already have this duty. The new Act keeps it that way
Since 2020, the Design and Building Practitioners Act has placed a statutory duty of care on anyone carrying out construction work in New South Wales. If you design, supervise, or manage engineering work on a building in New South Wales, you have been carrying this duty for several years now.
The wording of that duty, though, left room for argument that it only applied to residential building work. Many people who worked on commercial or industrial buildings believed (and argued) that the old Act didn’t apply to their them or their work.
The Building (Approvals and Practitioners) Act 2026 closes that gap: it separates the duty from the residential building work definition, removing any ambiguity that engineers working on commercial or industrial buildings sit outside its reach.
Prefab and Modular building work is newly recognised
Where the new Act does move the goalposts is prefabricated and modular construction. It formally recognises this kind of building work in NSW legislation for the first time, and brings manufacturers and suppliers of building products explicitly within the duty of care regime.
This matters for engineers who design prefabricated components. A design flaw in a prefabricated element can affect every project that component ends up in, not just one, so this extension broadens the practical exposure even though the underlying duty is the same one engineers have always carried.
This change is concerning because prefabricated components likely sit in a coverage gap depending on how your Professional Indemnity policy and Product Liability interact:
- Most PI policies have blanket product-related exclusions that step in the moment a claim gets framed around a “product” rather than “advice”, and
- Most PL policies have exclusions for damage caused by the defective nature of the insured’s own products.
By default, neither policy clearly covers engineers for their work on prefabricated components if a defect is identified.
Solving this coverage gap is not simple, so we recommend that you discuss this with a broker who can evaluate the exposure based on the type of work you do and your contracts.
What the courts have confirmed about the Duty
The Duty is non-delegable and personal
The Duty cannot be passed to someone else, even if they are the ones doing the work. This principle was confirmed in Goodwin Street Developments Pty Ltd v DSD Builders Pty Ltd (in liq) [2022] NSWSC 624, upheld on appeal in Roberts v Goodwin Street Developments Pty Ltd [2023] NSWCA 5.
The duty is also personal, meaning it attaches to individual people, not just the firm they work for. Being non-delegable and personal means the duty applies to the firms involved and to individual employees, contractors, and sub-contractors alike.
Proportionate Liability protections are uncertain
When a breach involves multiple parties, proportionate liability protections normally let each party pay only their share. For example, an engineer found partly at fault might argue the defect was twenty per cent their fault and eighty per cent the subcontractor’s, so they should only pay twenty per cent.
The High Court’s decision in Pafburn Pty Limited v The Owners – Strata Plan No 84674 [2024] HCA 49 found that this protection does not apply to developers and head contractors defending a statutory duty of care claim: they remain fully liable and must pursue their own claims against subcontractors separately.
What hasn’t been settled is whether this also applies to parties who carry out the work themselves, rather than delegating it to others, which is the position many engineers are in. This is a live and unresolved question and it is exactly the kind of uncertainty that makes adequate cover more important, not less.
Limitation periods run for up to 10 years
Claims arising from defective building work face an outer time limit of 10 years from completion of the work. In practice, claims are usually brought earlier than that: a separate 6-year period runs from when the loss is discovered, or reasonably should have been discovered, and this shorter period often applies first. But the ambiguity of which limit applies is confusing and can easily lead to Engineers cancelling their insurance too early.
The “adequately insured” requirement
Professional engineers are required to hold professional indemnity insurance that is adequate for the nature and risk of their work. The legislation does not spell out what “adequate” looks like. It is not as simple as a fixed dollar figure, and that ambiguity is left for engineers and their advisers to work through.
How does this affect insurance for Engineers?
The duty of care engineers have carried since 2020 is not going away, and the courts have been steadily narrowing the ways engineers and their employers can limit their exposure to it. Add the newly recognised prefab and modular category, and insurance for engineers is more important than ever.
In light of these developments, we recommend that engineers evaluate the following:
- Do you undertake any work in New South Wales?
- Do you undertake design work for prefabricated or manufactured components that may be used in a construction project in New South Wales?
- Is the limit of your Professional Indemnity policy high enough to cover actual damages, given the uncertainty over whether proportionate liability protections are available to you?
- Does your Professional Indemnity policy include endorsements reinstating cover for product-related claims?
- Are you, as an individual, covered by your insurance policies, or do they only apply to the firm you work for?
- Are you “adequately insured” in accordance with the requirements of the Act?
- Are you aware that you need to have Professional Indemnity insurance in place after you stop working as an engineer, known as run-off cover?
Insurance for engineers was already complex, and these developments are only adding to that. If you are not fully confident in your answers to the questions above, you will find value in having your insurance policies reviewed by an EngInsure specialist.