Statutory Fines & Penalties and Insurance cover

What is Statutory Fines and Penalties insurance?

Statutory Fines & Penalties insurance is a specialised type of insurance that protects the directors, officers and senior managers against having to pay large fines and penalties personally, as well as legal defence costs.

Fines given out by government bodies such as WorkSafe or the EPA can be extremely high, from hundreds of thousands to millions of dollars, potentially exposing the director or manager to financial hardship.

WH&S industrial death or manslaughter penalties can be severe; courts can impose life in jail and penalties of up to $5 Million for a person and $16 Million for a company.

So, it’s important to have the right cover to give you the best opportunity to avoid jail or minimise any potential penalty.

It’s important to note that some fines and penalties for breaches of WH&S laws cannot be insured, only legal defence costs.

Which laws and regulations have fines or penalties & potential jail time?

There are hundreds of laws and regulations that can be breached including Workplace Health and Safety Legislation • Environmental Law – EPA (Environment Protection Authority); Land and Environmental Court • Employment Practices Legislation • Industrial Relations Act • NSW Anti-Discrimination Act • Companies Law (e.g. Corporations Act 2001) • other Statutory Legislation with a provision for civil fines and penalties.

What type of insurance covers Statutory Fines & Penalties?

Statutory Fines & Penalties insurance can be purchased as a standalone policy or as part of a management liability or D&O policy.  As mentioned, it usually covers the legal defence costs, as well as paying the fine or penalty. The key risks insured can include:

• Pollution investigations and legal action by the EPA;
• Regulator investigations, such as Worksafe;
• Coronial inquests and other inquiries;
• Statutory prosecutions, penalties, enforceable undertaking expenses and legal costs.

Typical exclusions include wilful, intentional or deliberate actions and breaches of some laws where insurance is not allowed. Any damages, including exemplary or punitive damages.

The extent of cover can vary a lot between insurance policies, so you’ll need to check what is and is not covered.

Director Indemnity deeds

Finally, it’s worth reviewing any director’s indemnity deeds in place to ensure they have been updated to exclude insurance cover or any indemnity by the company or an insurance policy if it is against the law to cover fines and penalties in particular states or territories.

‍