Insurance coverage and the WHS Act

Looking to encourage companies and individuals to take better care when working under the new Work Health and Safety Act 2020 (WHS Act), a significant change has been made to what insurance will cover in the Act.

Penalties can no longer be covered by insurance and must now be paid by the individual.

It is an offence to insure against WHS penalties and it is also an offence to receive an indemnity from anyone – insurer or the company itself.

An individual can be a fined $51,000 and a body corporate can face a fine of $255,000 if they are found utilising insurance coverage for this purpose.

While legal fees are still covered, the change to the WHS Act ensures companies are more vigilant when it comes to complying with the new laws.

“The new WHS Act came about to align Western Australia with the national work, health and safety laws, which have been in effect and progressively implemented in other jurisdictions for the past decade,” GSK Insurance Brokers Workplace Risk Manager Lisa Stewart said.

“The WHS Act now prohibits businesses and individuals from entering into an insurance policy which purports to indemnify them wholly or partly from their liability to pay fines for an offence against the WHS Act or regulations.

“These changes were introduced in line with other changes, such as referring employers and employees now becoming people conducting a business or undertaking (PCBU), which enables the legislation and its regulatory bodies to hold more people directly accountable for poor work, health and safety performance.”

Indemnity

Ms Stewart said the definition of ‘indemnity’ was security or protection against a loss or other financial burden.

“In the insurance world, and particularly in relation to the changes in the WHS Act, the indemnity is in relation to an insurer indemnifying – protecting – an employer by providing insurance to pay for any fines or penalties imposed as a result of a work, health and safety breach,” she said.

“With the new legislation, an employer is no longer able to take out insurance to indemnify or protect them from paying for fines and penalties should they fail to fulfil their duty of care or breach any other area of the new WHS Act.”

Ms Stewart said this meant if a fine or penalty was imposed, the employer would be liable to pay for it directly and they could no longer rely on an insurance policy to do so on their behalf.

“Companies need to be more vigilant to ensure they have adequate systems in place to reduce any findings of non-compliance or negligence under the new laws,” she said.

Insurance for legal fees

Ms Stewart said while insurers could no longer offer any degree of indemnity against fines and penalties, there was still a great deal of value in having an insurance policy which covered legal fees.

“They can still have insurance to assist with paying for any legal representation or investigations required to build a defence against any allegations of non-compliance made,” she said.

“It is very worthwhile to retain adequate insurance – something all employers should be liaising with their insurance brokers about.”

“Good legal representation can make a huge difference in the level of fine that a PCBU can be subject to.

“This is more important than ever, with the level of fines increasing significantly and the introduction of custodial sentences for the most serious breaches of the new legislation.

“Some cases can take up to two years to resolve, so legal expenses can easily spiral out of control.

“This is the main switch in focus for insurance companies and brokers alike since the change.”

Other articles in the series:

Changing the face of health and safety in Western Australia
WHS Act 2020 - Key terms and definitions
What is a 'person conducting a business or undertaking?
How to prepare for the WHS Act 2020
Mental Health and the WHS Act 2020
Responsibilities of workers in the workplace