Hillman v Ferro Con (SA) Pty Ltd (in liquidation) and Anor [2013] SAIRC 22

Introduction

Hillman v Ferro means that a person who is insured against penalties for breach of work health and safety laws, may receive a higher penalty than a comparable person who is not insured.

An unsafe system

On 16 July 2010, a rigger was killed during the construction of the Adelaide Desalination Water Plant and another rigger narrowly avoided injury. Both were employees of Ferro Con (SA) Pty Ltd (Ferro Con), a steel works company. There was a failure to conduct a risk assessment, job safety analysis or safe working procedure for the relevant work.

Ferro Con and its sole Director, Paolo Maione were both prosecuted for breaching sections 19(1) and 16 of the now repealed Occupational Health, Safety and Welfare Act 1986 (SA) (OHSW Act). Maione was the Responsible Officer for OHS under the SA Act.

A lack of contrition

Ferro Con and Maione argued for a penalty reduction due to their early guilty pleas and contrition and cooperation with SafeWork SA. However, the court did not provide discount because Ferro Con had an insurance policy that indemnified Maione for fines imposed for criminal conduct.

The court found that “Maione successfully calling on an insurer to pay his fine” was “positive step” to avoid the legal consequences of his criminal conduct. The court noted that remorse “necessarily includes an acceptance of the court’s punishment. Without this, contrition is hollow.”1 Maione’s expression of contrition was doubted due to his claim against the insurance policy.

The court also considered that Maione’s actions had “undermined the court’s sentencing powers by negating the principles of both specific and general deterrence” by sending a message to employers and Responsible Officers that paying a fine as a consequence of serious offending can be avoided by calling on insurance.

The court concluded that Maione’s actions in calling upon insurance were “so contrary to a genuine acceptance of the legal consequences of his criminal offending that they dramatically outweigh the benefits to the justice system of the early guilty plea and statement of remorse.” As a result, neither defendant was afforded a reduction in penalty. Both Ferro Con and Maione were fined an amount of $200,000.00, two thirds of the maximum of $300,000.00 allowed under the OHSW Act for a first offence.

What is the legal status of Insurance Policies that Insure the Consequences of Breaching the WHS Act (Relevant Insurance)?

  1. It is not a crime to purchase Relevant Insurance. However, Relevant Insurance is void and unenforceable. Insurance companies are offering Relevant Insurance and it is being purchased by companies for their organisations and their officers.
  2. Relevant Insurance is regarded by some as a means for officers to avoid personal liability and as creating a “moral hazard” because insurance means that officers will have little incentive to pay careful attention to their officer’s duty and therefore the health and safety of workers and others;
  3. If an organisation’s officer successfully relied on Relevant Insurance and that reliance became public, it may negatively affect the organisation’s reputation (as it purchased the Relevant Insurance for the officer who was protected from personal liability); and
  4. There are two issues that may undermine Relevant Insurance:
    1. First, the fact that Relevant Insurance may result in an increased fine being awarded against a defendant; and
    2. Second, if the insurer does not agree that the Relevant Insurance covers the liability in question, a court may not assist the insured in its action against the insurer for contribution against liability (i.e. payment of a penalty).

Finally, this decision, together with other commentary is creating pressure for the creation of statutory provisions for the application of specific criminal penalties when a company purchases Relevant Insurance and when a company sells Relevant Insurance2.

Key Lesson

Persons insured against work health and safety penalties may receive higher penalties than uninsured persons. Duty holders under work health and safety laws generally seek to minimise their penalties because they become part of their sentencing history and that history is always considered when penalties for breach are being assessed.

Insurance policies against the consequences of breaching work health and safety laws are unenforceable. However, Relevant Insurance policies are available and being purchased. There is however pressure to address this position and from a practical perspective, the Hillman decision has increased that pressure.