Partial insurance against OSH penalties legal

Partial insurance against OSH penalties legal

Buying insurance to cover the risk of being fined under the new Health & Safety Amendment Act becomes illegal on May 5th when the Act comes into force. But employers will be able to insure against reparation costs awarded by the Courts, the Employers & Manufacturers Association (Northern) advises.

"Existing insurance policies covering workplace accidents become null and void on May 5th, and it will be illegal to try and purchase any policy that indemnifies employers against fines awarded under any OSH prosecution," said Paul Jarvie, EMA's Manager of Occupational Health & Safety.

"But this does not affect an employer's ability to insure against the awarding of reparation costs.

"Under the Health and Safety in Employment Act a penalty is defined as any fine awarded in combination with any reparation awarded. The penalties under the Act include both the fine and the reparation awarded by a Judge.

"The new Sentencing Act last year gave District Court Judges discretion to award reparation, which is a payment made to an employee which is not considered to be compensation but for consequential or emotional loss suffered.

"Since then a small number of cases have awarded minimal fines but with amounts of reparation up to four times larger than the fine.

"When a penalty including a fine and reparation is awarded, an employer might be liable to pay the fine with their insurer indemnifying them against the costs of reparation.

"For this to happen employers must:

a) make sure the word fine is removed from their policy, and

b) that reparation is clearly stated as part of the insurer's indemnification."

Mr Jarvie said the Courts currently award about 30 per cent of the present law's maximum penalty of $50,000 so it is reasonable to assume with maximum penalties under the Act rising to $250,000 that a breach of the new OSH law would rise proportionately.

"Employers should remember a single event can attract several prosecutions," Mr Jarvie said.

"Employers can also still insure against the costs associated with defending a prosecution.

"If the amounts of reparation awarded rise, and insurance policies are called upon, then premiums will rise. Prevention is obviously far better than cure.

"EMA's advice is that companies insist on good health and safety systems in their workplaces to prevent accidents happening in the first place."

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