Australia: Indemnification of personal penalties

Insurers have traditionally offered statutory liability insurance policies (SLIPs) to protect against legal exposure from claims for breach of duty. Typically these policies, subject to policy exclusions, will cover the legal costs of defending or settling litigation for a contravention of a safety or industrial obligation. SLIPs can also offer varying levels of protection against breaches of civil penalty provisions or fines. Subject to any statutorily prescribed limitations or policy terms that exclude prohibited conduct resulting in a breach, they can seem like a golden ticket to escape the personal financial burden of breaching obligations.

There have been calls recently to amend the Work Health and Safety Act 2011 (Cth) (WHS Act) to prohibit using SLIPs. Independent Reviewer Mr Tim Lyons echoed concerns about indemnification policies being used to protect against WHS fines in his Best Practice Review of Workplace Health and Safety Queensland report. The Government did not adopt this recommendation into the new Work Health and Safety and Other Legislation Amendment Bill 2017 (Qld), which was passed and assented to on 23 October 2017, but has not ruled out such a reform as part of a broader stocktake of the State's insurance markets.

Challenges have been made as to the use of SLIPs to protect against personal penalties and the courts have provided some guidance on the likely sentencing consequences where litigants choose to rely on their insurer for this purpose.

So what is the problem?

A number of interest groups have raised alarms about the availability of policies that indemnify an individual against personal penalties. Common concerns are:

  • the public policy fear that some individuals can "insure out" of their legal obligations, whilst others must pay the price for failing to meet them
  • the availability of SLIPs negatively impact the behaviour of those operating in industries or environments regulated by statute, and
  • the availability of SLIPs weakens the deterrent effect and overall purpose of pecuniary penalty regimes or fines, which are often intended to have a targeted consequence on the individual.

On the other hand, SLIPs can help manage the commercial problem of individual risk and liability in decision-making. Without appropriate liability management, it can be harder to attract skilled individuals to senior executive roles as they become exposed to strict responsibilities and penalties for breaches (of which they may arguably not be at fault). For example, many breach provisions do not require intent on behalf of the wrongdoer and could foreseeably leave an individual bankrupt for an act of recklessness or negligence. Those that do ultimately assume these roles consequently become more risk averse.1

Indemnification of personal penalties

Civil penalties

It is accepted practice that directors can seek out personal liability shields from the financial consequences for breaches under the Corporations Act 2001 (Cth). As noted previously, the classic argument against this is that these policies diminish the responsibility imposed on such individuals.

Civil penalties under the Fair Work Act 2009 (Cth) (the FW Act) can be viewed similarly. The purpose of the regime is to ensure those responsible for the actual decision-making are held accountable. However, we expect future cases will examine the ability of the courts exercising their statutory and/or any inherent powers to make non-indemnification orders for breaches of legislation.

Criminal penalties

SLIPs that offer coverage against paying a fine for a criminal offence are even more controversial.2 Detractors argue that this practice strikes at two key purposes of the criminal law: retribution and rehabilitation.3

In a workplace setting, these cases can arise in a safety context where the Court is imposing a fine for criminal conduct committed by an officer. In Queensland such a scenario falls outside the scope of s 272 of the WHS Act, which prohibits any contractual term from overriding the WHS Act's express provisions but does not make any limiting reference to indemnity policies. The Court commented on these issues in Hillman v Ferro Con (SA) Pty Ltd (in liquidation) and Anor [2013] SAIRC 22.

The employer, Ferro Con, operated a specialist steel business. In 2010, a falling beam struck and fatally injured one employee rigger and injured another whilst they attempted to move it into position. The employer was charged for breaching s 19(1) of the Occupational Health, Safety and Welfare Act 1986 (SA) (OHSW Act) for failing to ensure, so far as reasonably practicable, the safety of the rigger. The employer company had a sole director acting as the "responsible officer" under the OHSW Act, who was also charged for not taking reasonable steps to ensure the employer met its obligations.

Both Defendants pleaded guilty to the respective charges and believed the circumstances of their case warranted a penalty reduction. During sentencing, the Court was disapproving of each Defendant's decision to engage the employer's insurance policy. The Court considered that sincere remorse encompasses an expression of regret and an intention to change conduct in the future to avoid a similar incident occurring. To show remorse, the Court said there needs to be a real acknowledgment of the criminal wrongdoing and an acceptance of the penalties. In this case the reduction in penalty was not granted as the Defendants' decision to rely on their insurance policy demonstrated a lack of sincere remorse.

The takeaway

The appropriateness of the indemnification of personal penalties in civil and criminal matters will continue to be debated in the courts. Thus far, the Australian judiciary has provided a clear warning against reliance on SLIPs as a complete ticket out of obligations, particularly where contraveners are attempting to make an argument for a reduction in penalty. An intention to rely on an indemnity policy can lead to a compensatory increase in sentence or more adverse types of orders. In the long-term, these decisions could make policies less effective, more difficult to obtain and more expensive.

This article was originally published in the December 2017 issue of Proctor and is republished here with their kind permission. Click here to read the article.


1 Pecuniary penalties. Guidance for legislative design [2014] NZLCR 133, chapter 15.

2 An offence that must be proven beyond reasonable doubt. A 'criminal record' eventuates from a conviction – eg see Criminal Law (Rehabilitation of Offenders) Act 1985 Qld.

3 See The Honourable T F Bathurst, 'Insurance Law – a view from the Bench' (19 September 2013) Australian Insurance Lawyers Association National Conference, Sydney, [38].

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions