Neil Foster of the University of Newcastle is known to SafetyAtWorkBlog for his work looking at the legal liabilities of company directors and officers. Recently Foster released a paper called “You can’t do that! Directors insuring against criminal WHS penalties” which provides an additional legal context to an earlier blog article.
Foster acknowledges that
“…provisions of the criminal law imposing personal liability for company breach of workplace health and safety provisions provide one of the strongest ‘drivers’ for company officers to use due diligence to see to the implementation of company safety policies.”
“… what if the officer knows all along that, should they be subject to such a penalty, the company, or an insurance policy, will come to the rescue?”
This is a concern that relates to insurance policies or indemnities that are being offered in some industrial sectors. Insurance could dilute the diligence of officers and directors on a range of matters including workplace safety.
After considerable discussion, Foster says:
“…if the true impact of personal liability provisions is to be felt, it seems that some action must be taken to make clear what has been the policy of the law for many years, that a criminal penalty must be paid by the person on whom it has been imposed. Only then will the law ‘bite’ sufficiently for a real difference to be made.”
Michael Tooma, in his recent book “Due Diligence: Duty of Officers” states clearly that Directors’ and Officers’ liability insurance does not cover liability for work health and safety offences because these offences “are criminal in nature”. (page 11) Tooma says that insuring against legal costs is the best that can be done. This reality is important to remember and to impart to anyone who may feel that their corporation OHS obligations can be insured.
It is also useful to mention Tooma’s points when considering any insurance product that may be linked to a safety management system. In both situations, insurance products may diminish the motivation of executives to manage and improve workplace safety due to the reduced financial consequences.
Perhaps this adds strength to the argument for effective but non-financial OHS penalties, such as enforceable undertakings, as mentioned in the book Tooma wrote with Barry Sherriff in 2010 “Understanding the Model Work Health and Safety Act“. Costs may be avoided through insurance but demonstrable safety improvements may not.
It is very depressing for safety professionals to see corporate executives looking for ways out of safety obligations instead of looking for ways in, being engaged and becoming an agent of change.