New legislation in New South Wales and Western Australia proposes to ban insurance protection for breaches of Work Health & Safety law.


Proposed WH&S laws raise red flag for directors and managers


Despite the best of intentions and the most robust of health and safety systems, accidents and events do happen that are beyond the control of management. In order to protect directors and officers from inadvertent wrongdoing, organisations of all shapes and sizes rely on statutory liability insurance.


However, new Work Health & Safety (WHS) legislation, recently tabled in both the New South Wales and Western Australian parliaments, could jeopardise that protection by making it an offence to insure against WHS fines.


Removing the option to transfer financial risk to an insurer leaves individuals with management responsibility exposed to penalties for incidents which may be beyond their control.


If the insurance safety net disappears, the threat of steep personal fines may have some Directors and corporations seriously reconsidering whether they should continue operating a business (especially in the high-risk mining, construction, marine, transport, manufacturing and logistics industries) or sitting on a Board.


The proposed ban on insurance follows a recommendation in the Boland Report, which suggested that indemnity arrangements between WHS duty holders and insurers had the undesired consequence of reducing compliance with WHS Act obligations.


The maximum penalty for entering into an insurance arrangement in WA would be $55,000 for individuals or $285,000 for corporations. In NSW, individuals would face a fine of 1,250 penalty units ($125,000) and corporations 2,500 penalty units ($250,000).


However, the provision for legal defence costs in statutory liability policies will still be applicable and may help to reduce the financial burden of defending legal actions.


Until such time as the new legislation is passed, businesses with statutory liability cover will continue to be indemnified against monetary penalties for unintentional or accidental breaches of WHS legislation.


At EBM we help businesses large and small to develop risk mitigation strategies. In the WHS sphere, it is imperative to implement and maintain robust safety management systems that comply with current Legislation, Regulations and Codes of Practice. And while every organisation should have an incident response plan, the best way to mitigate WHS legal risk is to prevent accidents from occurring. The safety management system should effectively manage risk assessment, vertical and horizontal consultation, contractor management, audits, reporting, and incident management and investigation.



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