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. Previously, this cover could also extend for any potential statutory penalty that may be imposed by the Courts.
The Occupational Health and Safety and Other Legislation Amendment Act 2021 was recently given Royal Assent, and with its passing has significant effect on the extent of coverage provided to insured directors and companies under their current Management Liability policy.
The Amendment Act now prohibits the use of insurance or indemnity arrangements to avoid direct liability to pay penalties for offences against workplace health and safety laws in Victoria and applies to existing insurance and indemnity contracts. Any contractual clause or insurance arrangement which insures or indemnifies a person against liability for penalties imposed under the OHS Act or OHS regulations is now void.
This follows a similar stance 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’ adopted by Victoria in which any provision in an insurance contract which provides for an indemnity for fines or penalties becomes void with immediate effect, even if the incident which leads to the fine or penalty occurred months or even years earlier, whilst NSW have transitional provisions in place.
Additionally, and as from 22 September 2022, it will also be an offence to enter into a contract or insurance arrangement that indemnifies a person for fines in that way.
While these legislative changes significantly increase the exposure faced by Directors in any pending or future 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 changes again re-emphasises 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 these penalties are now unable to be indemnifiable by any current or future insurance program.
Further reading: https://www.vgso.vic.gov.au/ohs-update