Insurance for WHS fines in NSW now unlawful, but investigation and legal costs remain insurable
On 10 June 2020 the Work Health and Safety Amendment (Review) Act 2020 (NSW) commenced operation, making it unlawful to enter into, provide or benefit from an insurance or indemnity arrangement for a WHS fine in NSW. Insurance for WHS fines and penalties is still lawful in all states and territories other than NSW.
The amendments highlight the importance of having insurance policies covering the legal costs of responding to a WHS investigation or prosecution. The new laws also bring to the fore the public benefit of insurance for WHS investigations and prosecutions, given that underwriters will generally seek to ensure a business has proper WHS systems and procedures in place before insuring the business. Businesses which seek such insurance will need to have up-to-scratch WHS procedures.
Transitional provisions prevent any offences from being committed in circumstances where:
- the insurance or indemnity arrangement was in place before the Act commenced; and
- the payment relates to an incident that occurred before 10 June 2020.
This means it is not unlawful to hold an insurance policy for, or indemnify, a fine for a workplace incident that occurred before 10 June 2020.
There is nothing in the new legislation that prohibits or restricts defence costs or legal fees from being subject to an insurance or indemnity arrangement. Additionally, it is still lawful to insure or indemnify against the legal and implementation costs of an Enforceable Undertaking (EU). If accepted by the regulator, EUs avoid a conviction and any fine. EUs can also result in better outcomes for workers, businesses and the community at large, and should be considered as an alternative to a conviction by a business facing a WHS prosecution.
The amending legislation has also increased WHS fines and introduced a penalty unit system.
- The maximum fine for a category 1 WHS breach has increased from $3 million to $3,463,000.
- The maximum fines for a category 2 offence has increased from $1.5 million to $1,731,500.
- The maximum fine for a category 3 offence has increased from $500,000 to $577,000.
These new laws in NSW follow the first sentencing for industrial manslaughter offences in Qld on 11 June 2020 ( QDC 113). The company was fined $3 million and two directors received suspended jail sentences of 10 months each.
Industrial manslaughter provisions are also due to be implemented in Victoria from 1 July 2020. NSW has so far resisted adding an industrial manslaughter offence to the legislation, opting instead for an explanatory note which confirms that a person may be prosecuted for manslaughter for the death of a person at work under the Crimes Act 1900 (NSW), punishable by imprisonment for 25 years. Category 1 offences in NSW also carry a potential jail term of 5 years for an individual in addition to a fine.
The insurance market has long sought to reduce the incidence of reckless WHS conduct, primarily through exclusion clauses to deny cover where a business or individual has engaged in willful, deliberate or reckless conduct in breach of WHS laws.
Any businesses which lack, or have not recently updated their WHS procedures should seek legal advice from a workplace safety law expert.
*We acknowledge the assistance of Georgie Chard with the preparation of this Limelight