With the forthcoming introduction of harmonised national workplace health and safety laws, insurers and insureds alike should be conducting a review of their Directors’ and Officers’ Insurance Policies (D & O Policies), whether they are stand alone policies or part of a Management Liability Policy.
At the moment, the Commonwealth and all States and Territories are in charge of creating and administering their own separate workplace health and safety legislation.
In July 2008, the Council of Australian Governments executed the Intergovernmental Agreement for Regulatory and Operational Reform in OHS.
In accordance with this Agreement, Safe Work Australia was established and one of its principal responsibilities was to develop a Model Work Health and Safety Act (Model Act)i for each jurisdiction to enact as an Act of that jurisdiction.
This nationalised regime is intended to commence on 1 January 2012. To date only Queensland and New South Wales have enacted legislation in the same or similar form to the Model Act.
Under the Model Act, the primary duty of care is imposed on “persons conducting a business or undertaking”. This would include a corporation.ii
However, the Model Act also imposes a positive duty on “officers”iii to exercise due diligenceiv to ensure the person conducting the business or undertaking complies with the duties or obligations imposed by the Model Act.v
A breach of this duty is a criminal offence and can attract a maximum penalty of up to $600,000 or 5 years imprisonment or both depending on the category of offence.vi
The Model Act also imposes a positive duty on workersvii to:viii
(a) take reasonable care for his or her own health and safety; and
(b) take reasonable care that his or her acts or omissions do not adversely affect the health and safety of other persons; and
(c) comply, so far as the worker is reasonably able, with any reasonable instruction that is given by the person conducting the business or undertaking to allow the person to comply with this Act; and
(d) cooperate with any reasonable policy or procedure of the person conducting the business or undertaking relating to health or safety at the workplace that has been notified to workers.
A breach of this duty is a criminal offence and can attract a maximum penalty of up to $300,000 or 5 years imprisonment or both depending on the category of offence.ix
D & O Policies generally have an automatic extension that provides cover for defence costs for claims in relation to contraventions of workplace health and safety legislation. These policies generally state that this cover is provided, notwithstanding exclusions for personal injury and insured v insured claims.
Whether your D & O Policy will cover any monetary penalty imposed will depend on the wording. Some policies exclude fines and penalties, while others have an extension that covers fines and penalties associated with contraventions of workplace health and safety legislation (or wider statutory liability type exclusions). These policies that do cover fines and penalties may exclude it where it has been found by a court or the insured has admitted that the cause of the contravention was directly or indirectly based on, arising out of or attributable to the reckless or grossly negligent conduct of the insured or a knowing or intentional contravention of law.
Regardless of how broad the cover, these policies will not substitute and should not be substituted for sound systems of workplace safety.