WHAT IS STATUTORY LIABILITY INSURANCE & WHY DO I NEED?
Statutory liability insurance policies provide cover against unintended breaches of particular NZ laws, regulatory offences. For example the Health & Safety Work Act 2015, and the Resource Management Act 1991.
What does a statutory liability insurance policy cover?
Depending on the insurance company and their different policies the cover provided will usually include defence costs in relation to any charges laid by a regulator and the fines and reparations, where permissible by law, if the insured is convicted and sentenced in relation to the charges laid against them.
Some additional costs may also be covered such as legal costs for assisting with regulators' inquiries and investigations may be covered. While some policies don't include, it's a very useful addition because regulators will generally requests documents, information and interviews before formally laying charges.
If cover is not triggered until that point, significant costs can be incurred without being covered by the policy.
Legal costs for preparing applications for enforceable undertakings may also be covered under a statutory liability policy cover.
No cover is provided for civil liabilities.
Who does a statutory liability insurance policy cover?
Statutory policies will generally cover the insured entity (company, directors, officers and employees).
Do you need to pay an excess on the insurance policy?
Depending on the policy wording, an excess will be payable in relation to the insured entity. However, with respect to individual directors, officers and employees and excess is often not imposed. Excesses may vary for prosecutions under different government acts due to the particular risk exposure of each individual insured.
What does a regulatory offence involve?
Regulatory offences are a breach of a regulation like an Act of Parliament. Most offences covered by statutory liability policies are 'strict liability' offences. This means that a person or party who is alleged to have committed the offence did not intendto commit the offence.
It is enough that the prohibited act or omission was committed.
Intentional offences by an insured are not covered by statutory liability policies.
Who can charge you with a regulatory offence?
Most industry regulators can lay charges. This includes:
- WorkSafe (and other regulators , such as Maritime New Zealand) can lay charges regarding health and safety
- The Commerce Commission can lay charges in regards to competition law, consumer services and products
- Local councils can lay charges regarding the Resource Management Act and the Building Act
- Maritime New Zealand can lay charges regarding maritime related issues
- The Financial Markets Authority can lay charges regarding financial markets matters
What are the potential penalties?
It depends on the circumstances, the offender and the act that has been breached. For example, the Health and Safety Works Act 2015 provides for a maximum fine against a company of up to $1.5m for exposing an individual to the risk of death or serious injury.
The act prevents insurance cover fines, but defence costs are insurable. However, if an insured is charged with recklessness (which requires intentional conduct) such a claim will be fully excluded from the coverage. For that charge there is a maximum fine of $3 million.
Why do I need specific statutory liability insurance policy given I already have cover for such events under other policies?
Generally other policies will not provide cover for your defence of regulatory offences and the fines and /or reparations imposed because of a successful prosecution.
Some other insurance policies can include parts of the cover available under a statutory liability policy. For example, Directors & Officers Liability policies often include cover for defence costs for directors and company officers in relation to health and safety prosecutions. However they do not usually cover fines (even where permitted) and/or reparations that might be payable by an insured.
Also D&O policies do not usually provide any cover to the company itself. It is usually the company that receives the largest fine.
Regulators are becoming increasingly aggressive in the approach to investigation and prosecution of individuals and companies with respect to possible or actual breaches of Acts of Parliament.
Statutory liability policies offer unique coverage and benefits for these situations an will assist you to be prepared, advised and represented should a regulator come knocking at your door.
Would you like to discuss your situation?
Contact us via any of the following:
Tel: 09 360 5555
Mob: 0273 000666
E mail: firstname.lastname@example.org
WHAT IS STATUTORY LIABILITY INSURANCE AND WHY DO I NEED?