Significant reforms to NSW Work, Health and Safety laws mean insurers can no longer offer cover for WHS-related fines and penalties.
Previously, these fines and penalties could be covered under the Statutory Liability section of Management Liability products, but this has now been deemed “unlawful” under amendments to the Work Health and Safety Act 2011 (NSW).
The changes came into effect on June 10, 2020, with organisations now unable to provide or benefit from insurance covering fines and penalties related to workplace incidents from this date.
Insurers/PCBUs face potential $125,000 fine
SafeWork NSW commented on the new insurance laws, stating they are designed to ensure people conducting a business or undertaking (PCBUs) cannot avoid responsibility for paying WHS fines.
Section 272A of the Act now states:
A person must not—
(a) without reasonable excuse, enter into a contract of insurance or other arrangements under which the person or another person is covered for liability for a monetary penalty under this Act, or
(b) provide insurance or a grant of indemnity for liability for a monetary penalty under this Act
The maximum penalty is 250 penalty units for an individual and 1,250 penalty units for a body corporate. The current value of a penalty unit is $100.
Gross negligence fines increase
Category 1 offences under the Act have also been enhanced to include “gross negligence”. Supporters of the amendment say this will make it easier to prosecute and create stronger incentives for PCBUs to manage WHS risks.
A Category 1 offence can now be made out where it can be shown that a PCBU:
(a) without reasonable excuse, engaged in conduct that exposed workers or other persons to a risk of death, serious injury or illness; and
(b) engaged in the conduct with gross negligence.
The maximum penalty for a Category 1 ‘Gross negligence or reckless conduct’ for an individual has increased to 3,465 penalty units or 5 years’ imprisonment, or both.
For a body corporate, the fine is 34,630 penalty units, current value $3,463,000.
‘Gross negligence’ undefined
Although the Act does not define ‘gross negligence’, one definition in a civil law context is: “akin to the very high standard of negligence or recklessness required to establish criminal responsibility”.
NSW is now the only state in Australia where insurance for WHS fines and penalties is unlawful. However, legal costs accumulated by an organisation while defending WHS claims are still insurable.
If you’d like to discuss taking out insurance to cover WHS legal costs, or find out more about the changes, contact your local Reliance Partner.