NSW Workplace Health and Safety Amendments - Prohibition Against Insuring WHS Fines
Following the release of Ms Marie Boland’s 2018 Review of the Model WHS Laws: Final Report (Report), the NSW Government sought to pursue some of the recommendations made by way of introducing amendments to the current Work Health and Safety Act 2011 (NSW) (WHS Act).
On 4 June 2020, the Work Health and Safety Amendment (Review) Bill 2020 (NSW) (the Bill) was passed by both Houses. The Bill was assented to on 10 June 2020.
There has been a noticeable trend in the WHS space generally towards increased penalties for WHS offences. The new amendments to the WHS Act take this a step further, seeking to increase penalty levels in line with recommendation 22 of the Report by shifting away from fixed monetary penalties and, instead, providing for penalties based on penalty units – allowing penalties to more appropriately reflect increases in the consumer price index.
In addition, the amendments seek to prevent insurance being extended to corporations and individual directors with respect to financial penalties issued for breaches of the WHS Act, on the basis that such insurance fundamentally undermines the ability of such fines to act as a deterrent.
For the insurance industry, the following amendments in the Bill are of the most pressing significance:
- a person cannot enter into a contract of insurance or other arrangement under which they are covered for liability for a monetary penalty under the WHS Act (s272A(a) of the Bill). A breach of this provision can attract a maximum penalty of 250 penalty units (currently $25,000) in the case of an individual or in the case of a body corporate, 1,250 penalty units (currently $125,000);
- a person cannot provide insurance or a grant of indemnity for liability for a monetary penalty under the WHS Act (s 272A(b) of the Bill). A breach of this provision can attract a maximum penalty of 500 penalty units (currently $50,000) in the case of an individual, or 2,500 penalty units (currently $250,000) in the case of a body corporate;
- officers of bodies corporate may be liable if they aid, abet, counsel or procure, induce (whether by threats or promises or otherwise) or conspire with others to effect the commission of an offence under the new provisions (s 272B(1) of the Bill);
- a person will not be found to have committed an offence under s 272A for providing, or taking out insurance, or for granting indemnity under an existing insurance arrangement provided that any payment made under such an existing arrangement is not in relation to a liability for a monetary penalty under the WHS Act for an incident that occurred after the commencement of these changes.
In view of the amendments set out above, insurers, brokers and businesses purchasing insurance will need to be vigilant to ensure compliance with the new regime.
In particular, insurers should ensure that any new policies issued post commencement do not contain any prohibited cover. Brokers will equally need to be careful to ensure that they do not facilitate insurance for their clients which provides cover now prohibited under the WHS Act.
Whilst policies already “on-foot” will not necessarily need to be amended - insurers are now prohibited from paying out for penalties under an existing policy for a post-assent incident. In view of this, insurers and brokers would be well advised to consider communicating these changes to their clients.
Thought may also need to be given to whether the impact of the amendments to the WHS Act should have an impact on the level of premium charged for policies already in place, and those placed going forward.
This article was authored by Simon Black, Laura Sowden and Lucinda Touma (Law Clerk).