In response to proven breaches of occupational health and safety laws, judges usually apply financial penalties to companies and individuals. These penalties, like all court-ordered punishments are to deter the offenders from re-offending but also to show others the consequences of their actions. But what if an insurance company would pay for that penalty in return for regular premium payments? If the offender does not pay the penalty, deterrence is gone.
On 27 June 2013, a company and its director were fined $A200,000 each in relation to workplace incident that resulted in the gruesome death of one man and a near miss for another but the director had taken out a general insurance policy and the insurance company paid out!!??. A fine of $A200K awarded but the offender may pay no more than $A10K.
Labour lawyers have stated for years that insurances, particularly director’s and officer’s (D&O) liability, cannot apply to court-ordered financial penalties. Michael Tooma has said
“that Directors’ and Officers’ liability insurance does not cover liability for work health and safety offences because these offences “are criminal in nature””.
Neil Foster of the University of Newcastle has warned of the need to clarify D&O insurance products:
““…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.”
The case of Hillman v Ferro Con (SA) Pty Ltd (in liquidation) and Anor  SAIRC 22 on 27 June 2013 it seems to have proven some labour lawyers wrong. The potential legal and corporate impact of this case could be substantial.
Readers are urged to access the case judgement through the link above and consider the case carefully. A short summary and response to the case is provided by the ABC. SafeWorkSA has issued a media release on the judgement which is very cautious in its wording.
“SafeWork SA charged Ferro Con (SA) Pty Ltd with failure to provide a safe system of work under the Occupational Health, Safety and Welfare Act 1986. Mr Maione was charged under the same act with failure to take reasonable steps to ensure the company’s compliance.
The court heard that neither a risk assessment nor a job safety analysis were conducted before the 1.8 tonne, 14-metre long steel monorail beam was lifted into place, with two workers directly below it.”
The judgement details the incident as such:
“The riggers’ employer Ferro Con, was then using a large crane to install a 1.8 tonne 14m long steel monorail beam to the rafters of a partially built building. The lifting of the beam had been poorly planned by others. No risk assessment or job safety analysis had been undertaken for this type of lift, and no safe working procedure had been devised to take account of the particular hazards of the task. As a result Mr Fritsch was required to pull down heavily on a tag line in an attempt to lower the tilted beam’s high end to a level position, so it could then be bolted to a rafter. This necessarily required Mr Fritsch to stand under the beam to exert the required force, contrary to a general instruction to not stand under a load.
While Mr Fritsch was trying to do this the fabric sling supporting the beam snapped, resulting in the end of the beam dropping directly onto his head. He was instantly rendered unconscious and died soon after.
The other rigger, Craig Fowler, was standing on an Elevated Work Platform at the time. His machine was struck by the falling beam but he was able to ride the fall until he could jump clear onto nearby scaffolding.”
According to the judgement Paolo Maione was the sole Director of Ferro Con since 2006, and the Responsible Officer. He was prosecuted as the Responsible Officer. However, initially Maione said that his sister was the responsible person.
Maione accepted remorse for the incident that led to the death of 35-year-old Brett Fritsch. The defendants’ lawyer Mr C Bleby QC asked the court for a reduction in the penalty as a result but the magistrate declined this request. Below is Industrial Magistrate Lieschke’s response to this (emphasis added):
“Ferro Con had in place a general insurance policy which apparently included indemnification of its Director for fines imposed for his criminal conduct. Curiously the insurance covers a criminal fine but not a consequential compensation order. The insurance cover carries a $10,000 excess or deductable payment. As Ferro Con is in liquidation and has no assets with which to pay the excess Mr Maione has paid it personally. He may not even bear the full cost of this if claimed as a tax deduction. By his payment he has ensured the insurance company grants both Ferro Con, and more importantly him, the indemnity he sought. In this way Mr Maione has made arrangements to avoid the vast bulk of the anticipated monetary penalty.
In my opinion Mr Maione’s actions have also undermined the Court’s sentencing powers by negating the principles of both specific and general deterrence. The message his actions send to employers and Responsible Officers is that with insurance cover for criminal penalties for OHS offences there is little need to fear the consequences of very serious offending, even if an offence has fatal consequences. As for specific deterrence Mr Maione has not said he no longer has such insurance for his current businesses.
In my opinion Mr Maione’s actions are 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.”
SafetyAtWorkBlog expresses deep sympathy to Brett Fritsch’s family over his death.
The details of the circumstances of the incident included in the judgement read like a detailed incident investigation report and over the next few days, SafetyAtWorkBlog will put together a discussion on the issues raised and the deficiencies listed. It is a sad tale of an activity that is regularly done on many construction sites in Australia and elsewhere.
But there is also a political dimension to the incident as it occurred on the trouble construction site of the Londsdale-based Desalination Plant in Adelaide, a project that led to a Parliamentary Inquiry.