Directors and officers have historically been able to make use of directors & officers insurance and grants of indemnity to assist in the management of their exposure to penalties under the Work Health and Safety Act 2011 (NSW) (Act).

Recently, however, the Act has been amended to create an offence of entering into, providing or taking the benefit of any insurance or indemnity arrangements that seek to cover a person from a monetary penalty under the Act.  The amendments also provide that an officer of the company is deemed to have committed an offence if they have directly or indirectly been involved in the creation, provision or taking a benefit of an insurance or indemnity arrangement to protect against a monetary penalty under the Act.

The amendments, however, are silent as to whether there is a prohibition on obtaining, providing or taking the benefit of an insurance or indemnity arrangement that seeks to cover a person for legal costs related to addressing any action or inquiry seeking to impose a penalty under the Act.

 

Maximum penalties for breaches of the amendments

Where a breach of the amendments is committed, a person or corporation may face the maximum penalties, as set out below.

Section Maximum penalty for an individual Maximum penalty for a body corporate
Section 272A(a) $25,000 $125,000
Section 272A(b) or (c) $50,000 $250,000
Section 272B $125,000 N/A

 

Strategies to manage the amendments:

If you’re a director or officer;

  • It is essential that you are acquainted with the recent amendments to the Act and ensure that existing insurance and indemnity arrangements abide by the new restrictions;
  • If a penalty is imposed under the Act, the person to whom the penalty is issued is liable for the penalty and is not able to be insured or otherwise indemnified for that penalty; and
  • If any of the amendments to the Act are breached, the officer and the company in question may face the additional penalty (on top of the penalty under the Act) for breaching the amendment.

If you’re an insurer;

  • You may incur a penalty for a breach of section 272A(b) of the Act if you provide a policy of insurance or if you include an indemnity in a policy of insurance to cover a penalty under the Act; and
  • Review the wording of existing policies to ensure that you are not in breach of the new amendments.

If you’re a broker;

  • It is essential that you are acquainted with the recent amendments to the Act so that you are in a position to advise your clients on risks that they cannot be insured and/or indemnified against; and
  • Review their client’s insurance policies to ensure that those policies are not in breach of the new amendments.

**Assisted by; Alana Davison**