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Currently in Victoria, businesses and company directors have the option to secure a Management Liability insurance policy which, amongst coverage for liabilities brought against said Directors in the event of an OHS/WHS investigation, also provide cover for the defence of a criminal prosecution against the company and/or its directors and any potential statutory penalty that may be imposed by the Courts.

The Occupational Health and Safety and Other Legislation Amendment Bill 2021 (Vic) is currently before Parliament, and if passed, will have a significant effect on the extent of coverage provided to insured directors and companies under their current Management Liability policy.

The Bill, if passed, will make it an offence in Victoria to insure or provide an indemnity against a fine or penalty under occupational health and safety legislation. This follows a similar tact taken with the passing of the Work Health and Safety Amendment (Review) Bill 2020 (NSW) in June 2020 which made it unlawful to enter into, provide or benefit from an insurance or indemnity arrangement for an OHS/WHS fine in NSW.

A key difference between the two states however is the ‘harder line’ being proposed by Victoria in which, once the legislation is passed, any provision in an insurance contract which provides for an indemnity for fines or penalties becomes void with immediate effect and it would be an offence to indemnify or receive indemnity via an insurance policy for an OHS fine or penalty as from the date of the Act becoming law, even if the incident which leads to the fine or penalty occurred months or even years earlier.

While these proposed changes will significantly increase the exposure faced by Directors in any pending OHS investigation, it is important to note that it will still be lawful for insurers to provide coverage for investigation and defence costs, which can be of great significance.

These proposed changes reemphasise the need for all employers across the state to remain focussed on providing a safe work environment and to ensure they have adopted an approach that complies with the relevant legislation in regard to OHS/WHS to ensure avoidance of pecuniary penalties, as moving forward and if this legislation is passed, these fines are unlikely to be indemnifiable by any current insurance program.

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