Statutory Liability Insurance in Australia
Statutory liability provides coverage for civil penalties, legal defence costs, reputation and crisis costs, enforceable undertakings, and even a prosecution’s legal costs where a successful prosecution has occurred from a regulatory authority.
Australia has both a well developed and respected legal system when compared to many other places in the world.
Because of this confidence in our legal framework, local insurance companies have been able to develop policies to protect both companies and individuals from statutory risks arising from wrongful breaches of legislation. Australia and New Zealand are two countries that provide this type of protection.
All statutory liability policies, as with all insurance policies, have standard exclusions. These exclusions state no cover for penalties uninsurable at law. Statutory policies contain phrases such as ‘where insurable at law.’ This protection relates to civil, and not criminal case proceedings as criminal fines are not insurable.
It is important to remember that statutory liability protects both businesses and individuals from the huge number of Acts and regulations that business must comply with.
Some recent examples of the types of incidents that would be insured under Statutory Liability is provided below.
- Offence: Sending SMS messages without consent, for failing to identify who authorised them clearly and for not including an unsubscribe statement.
- Penalty: $50,400
- Offence: Sending unsolicited marketing emails to customers who had previously unsubscribed to receive such emails
- Penalty: $1,003,800
Food Act 2006
- Offence: Breaching Food Safety standards including lack of:
- Maintenance and cleanliness of food premises
- Maintenance and cleanliness of food equipment
- Prevention of pests entering the food premises
- Eradication of pests and prevention of harbourage of pests on food premises
- Penalty: $579,700
Environmental Protection Act 1993
- Offence: Environmental harm by discharging 40,000 litres of aluminium sulphate into Yetti Creek when a PVC fitting on pipe work failed at Barossa Water Treatment Plant breaching Section 80 (2).
- Penalty: $80,000
Corporations Act breaches
In 2019, civil breaches of the Corporations Act 2001 (Cth) and Australian Securities and Investments Commission (ASIC) Act, were increased tremendously.
- For an individual, maximum civil penalties increase from $200,000 to the greater of $1.05 million or three times the benefit gained (or loss avoided) from the breach’
- For corporations, maximum civil penalties increase from $1m to the greater of $10.5m, or three times the benefit gained (or loss avoided, or 10 per cent of annual turnover with a cap set at $525m.
For both individuals and business, who can often be over-run with procedural requirements, and where strict liability could apply and an inadvertent breach occur, we see a need to review your Statutory risk.
Workplace Health and Safety
In recent times, there has been a push from state parliaments to prohibit insurance for breaches of Work Health and Safety Acts. From a moral back ground this makes sense.
On June 10, 2020, the new sections 272A and 272B of the Work Health and Safety Act 2011 NSW expressly prohibit insurance or indemnity agreements for any penalty under the Act, and create an offence for anyone that breaches that prohibition. In Western Australia, there is the potential of a similar piece of legislation to be enacted.
Many believe that Statutory Liability relates purely to fines and penalties relating to Workplace Health and Safety, however, this is not the case. Please note many costs are still incurred with a WH&S breach unrelated to a fine or penalty. With an incredible number of other Acts at both State and Federal level, the need for Statutory Liability cover is not alleviated.
Purchasing a statutory liability policy in itself is part of an overall risk management plan that includes proper systems, documented policies and procedures, training, education and enforcement to ensure the safety of workers and other people that come into contact with the business.
Statutory Liability insurance can be purchased as part of a Management Liability policy, or on a stand-alone basis.
For a discussion on this type of cover and the choices available in the market, please contact us today.