Signed on Site, Declined at Claim: Mining’s Hidden Contract Risks

Contracts can look watertight on paper—and still quietly dismantle your insurance cover behind the scenes.

As a commercial manager who’s sat on both sides of the table—negotiating deals and handling the claims fallout—I’ve learned that some of the biggest insurance headaches don’t come from freak events. They come from the contracts we signed without thinking like an insurer.

Time and again, I see businesses sign terms that feel commercially sound, only to discover they’ve exposed themselves to costly, uninsured liabilities. These aren’t theoretical risks—they are common traps that emerge when contracts and insurance aren’t in sync.

Here are some of the most common, yet overlooked, contract mistakes—often seen in mining services, engineering, and technical consultancy contracts—that morph into insurance headaches:

Blurred Indemnity Clauses That Shift Liability Back to You

Many mining services contracts contain indemnity clauses that attempt to push all project-related liabilities—regardless of fault—back onto the service provider.

For example:

“The Contractor indemnifies the Principal against all claims, losses, damages, and liabilities arising from or in connection with the performance of the services, including any acts or omissions of the Contractor, its employees, or subcontractors.”

While it seems standard, this broad language means your company could be liable even where the client’s own negligence contributed. From an insurance lens, this is dangerous. Your policy may not respond if you’ve contractually assumed liabilities outside common law negligence.

Risk Tip: Always ensure indemnity clauses are proportionate to fault and do not create a blanket assumption of liability for third-party actions.

Contractually Widening the Definition of ‘Insured Work’

In mining-related contracts, clients often expand the scope to include advisory on areas beyond your declared expertise—like environmental risks, downstream production impacts, or community engagement obligations.

For example:

“The Consultant shall provide technical advice on any matter reasonably requested by the Principal relating to the Project, including but not limited to safety, environmental, and commercial impacts.”

This wording can inadvertently extend your liability beyond your insured activities. Your insurer may refuse a claim if the dispute relates to advice you weren’t rated or qualified for under your PI policy.

Risk Tip: Carefully cross-check the described scope with your policy schedule. Do not agree to ‘catch-all’ advisory obligations.

Silent Acceptance of Uninsurable Obligations

Mining and resources contracts frequently insert clauses requiring the consultant to warrant the success of the project or accept fixed liquidated damages for delays or non-performance.

For example:

“The Consultant guarantees that the services will achieve the intended project outcomes and accepts liability for any consequential loss arising from project delays.”

These are classic uninsurable obligations. No PI or liability policy will respond to pure financial guarantees or consequential losses without direct physical loss or negligence.

Risk Tip: Always challenge uninsurable clauses and ensure your client understands insurance is designed to cover negligence—not project guarantees.

Misaligned Contractual Jurisdiction or Choice of Law

It’s not uncommon to see mining service agreements adopting the law of the client’s head office jurisdiction (e.g., USA, Canada) even when the project is in Australia.

For example:

“This agreement shall be governed by the laws of the State of New York.”

This can create major complications when your insurer only responds to claims under Australian law. You may also face higher legal costs defending claims offshore.

Risk Tip: Always push for local jurisdiction aligned with your insurance policy wording.

Overlooking Notification Clauses that Conflict with Policy Conditions

Certain contracts demand immediate notification of any incident that may give rise to a claim, often within 24-48 hours.

For example:

“The Contractor must notify the Principal in writing within 24 hours of any event, incident, or circumstance which may result in a claim.”

This can create a contractual breach if missed, while your policy might only require notification as soon as practicable. These conflicting obligations create unnecessary exposure.

Risk Tip: Where possible, negotiate notification clauses to align with your insurance policy wording—or at least ensure they don’t create separate contractual penalties outside insurance timelines.

Final Word: Contracts and Insurance Must Speak to Each Other

As commercial managers, we sit at the intersection of legal, commercial, and insurance realities. Every word you accept in a contract has the potential to reshape your insurance landscape. My advice? Bring your insurance brain into the room when contracts are negotiated—not after the claim hits your desk.

Because by then, it’s no longer a negotiation. It’s damage control.