What Is A Principal's Indemnity Extension?

If you’re a subcontractor in Western Australia, it’s common to be asked by a principal contractor or client to add them as an interested party on your workers' compensation policy, often referred to as a Principal’s Indemnity Extension.

But what exactly is it, and why are they asking you for it?

Here’s a simple explanation to help you understand and get it sorted quickly.

You’re the Subcontractor. They’re the Principal.

In this situation:

• You are carrying out work on someone else's behalf

• They (the principal contractor or client) are engaging your business

• They want to make sure that if one of your workers is injured on the job, they won’t be held responsible under WA workers' compensation law

Why They’re Asking You for This

Under the Workers’ Compensation and Injury Management Act 1981 (WA), if your business doesn’t hold proper workers’ comp cover and one of your workers is injured, the principal may be considered liable.

That’s a serious risk for them — especially on worksites where multiple subcontractors are involved.

So, to protect themselves, they’ll typically ask you to:

• Confirm you have workers compensation insurance

• Add them as an “interested party” or include a Principal’s Indemnity Extension

This gives them peace of mind that their legal exposure is covered under your policy, not theirs.

What the Extension Does (and Doesn’t Do)

A Principal's Indemnity Extension:

• Provides cover to the principal contractor under your workers comp policy

• Applies if you’ve taken out proper cover and there’s an agreement in place

• Doesn’t cost much to add — but may need to be formally endorsed by your insurer

It does not:

• Replace their own insurance

• Cover you for liability outside the workers compensation framework

• Protect either party against public liability or contractual disputes — that’s separate

How to Get It Added

1. Contact your broker or workers compensation insurer

2. Request a Principal's Indemnity Extension endorsement

3. Provide the name and ABN of the principal asking to be noted on the policy

4. Request a Certificate of Currency showing the extension has been added

5. Send the certificate to the principal/contract manager as proof

Tip: It’s a good idea to check whether this is needed before signing the subcontract agreement, so there’s no delay in starting the job.

Why It’s In Your Best Interest Too

Yes, the principal is covering themselves — but complying with this request:

• Shows you’re a professional operator

• Avoids delays in getting on site or progressing work

• Helps build trust and credibility with larger clients

• Ensures everyone is protected if a claim arises — including you

Not sure if your workers compensation policy includes this extension? We can review your cover, add the necessary wording, and issue a compliant Certificate of Currency to help you meet contract requirements.