The impact on insurance coverage for penalties and fines

Published on 19th March 2020

The human impact of an individual death is traumatic and far-reaching. For the families and friends of those individuals killed at their place of work, the loss has had a profound and lasting impact on their lives. 

As a result, Australia has recently seen a continuous debate surrounding Workplace Health and Safety legislation, following a national review into Australia's model Work Health and Safety laws. 

The review considered the appropriateness of insurance policies covering fines and penalties from offences committed under workplace laws. Subsequently, a recommendation has been proposed to prohibit insurance for WHS related penalties, by making it an offence to:

• enter into a contract of insurance or other arrangement under which the person or another person is covered for liability for a monetary penalty under the Work Health and Safety legislation;
• provide insurance or a grant of indemnity for liability for a monetary penalty under the model Work Health & Safety Legislation; and
• take the benefit of such insurance or such indemnity

Based on the above recommendations, legislation is currently pending in NSW to make it an offence to enter into a contract of insurance to cover liability or monetary penalties, or provide insurances or other indemnity arrangements, with respect to penalties pursuant to the Work Health & Safety Act 2011 (NSW), (NSW WHS Act). The proposed legislation will also make it an offence to take the benefit of such arrangements. 

Melita Simic, Head of FINPRO Technical, Marsh JLT Specialty, Pacific, along with Ciara Donnelly, Senior WHS Consultant for Mercer Marsh Benefits unpack the amendments, the implications this may have on new and future insurance policies and solutions available to employers to mitigate workplace risks.