WHS fines and penalties in Western Australia are now no longer able to be covered by insurance with amendments to the Work Health and Safety Act 2020 coming into force in Western Australia on 31 March 2022.
Prohibiting insurance for WHS offences brings WA into line with similar provisions in NSW and Victoria1. The Act is the result of a lengthy reform process and an adoption of the harmonised legislation in place across several Australian states and territories. In addition to important changes to the insurability of WHS penalties, the Act also makes changes to industrial manslaughter laws and imposes greater responsibilities on “persons conducting a business or undertaking” (PCBU). PCBU is a new concept introduced by the Act and can be a person or an organisation, for example: a company (and its directors and officers), sole trader, partnership, government departments, and unincorporated associations. Further detail on the changes introduced by the Act can be found in our Workplace Risk publication
WA businesses should be aware that if they have a current policy of insurance that purports to provide cover for the company or its directors or officers for fines and penalties under the Act, those provisions are now void. The Act also prohibits the company providing indemnification to directors and officers under other arrangements such as a contract of employment or deed of access and indemnity.
The Act now makes it an offence to insure against WHS penalties. Similarly, it is an offence to receive an indemnity from anyone (whether an insurer or the company itself). These new offences carry significant penalties of up to $51,000 for individuals and $255,000 for body corporates and can apply to:
These new offences are designed to ensure monetary penalties retain their deterrent value in order to encourage businesses and individuals to comply with their duties under work, health and safety laws.
Like Victoria, WA does not have a “grace period” for prosecutions. This means that even if you have an active claim and your insurer previously confirmed cover, or if the WHS prosecution commenced before the Act came into force on 31 March, insurers cannot provide any indemnity for a penalty under any kind of insurance after 31 March.
Importantly, the Act does not prohibit insurance from providing cover for legal expenses for a business or individual defending themselves against a WHS prosecution, or the cost of any court-ordered damages. Cover for legal costs will remain an important benefit available to businesses and insured persons for prosecutions, inquiries and investigations. As an illustration, a director who is prosecuted for industrial manslaughter can be indemnified for his costs of defending the claim, which can run well over $100,000.
Many insurance policies that would respond to WHS prosecutions will already include language to say that fines/penalties are covered only “to the extent permitted by law”. So, in many cases, no changes to the policy wording will be necessary.
However, businesses and directors should:
The increased legislative activity in relation to WHS regimes has businesses and executives seeking to understand the extent to which they can mitigate against such risk, and how their insurance may provide some form of protection.
Although penalties are no longer insurable in WA, legal costs can be insured and the key solutions organisations should consider include:
Workplace safety breaches can attract significant penalties and personal consequences for individual executives, such as the new WA industrial manslaughter laws which carry a maximum penalty of up to 20 years’ imprisonment.
To avoid sanctions, now is the time to act. Having a robust WHS management system in place that is implemented and followed by everyone in the organisation is the best way to avoid exposure. The new Act aims to ensure PCBUs not only fully understand WHS risks in their business, but also take positive steps to manage these risks and create a positive safety culture. Complying with WHS laws requires a solid commitment to safety in the workplace at all levels of a business.
Businesses should:
At WTW, our experienced Workplace Risk team is available to assist you obtain the best possible outcomes for any risk event. We also have specialised insurance brokers in FINEX to advise you on the best insurance solutions to protect your business and its people. Proactive management of work health and safety risks results in reduced claims, claim duration and insurance premium costs.
Contact your local FINEX broker or Workplace Risk advisor for further information and assistance.
1 Read our alert on the Victoria ban on insuring WHS penalties
Anna leads our Work, Health and Safety (WHS) team which forms part of our broader Workplace Risk Practice. Her team assist clients in understanding their ongoing obligations under WHS legislation and partner with them to implement the right risk prevention strategies for their workplace.
