Are WHS Fines Insurable in Australia?

Section 272A of the WHS Act 2011 (NSW) commenced on 10 June 2020 as part of the Work Health and Safety Amendment (Review) Act 2020. The section creates three distinct offences. First, it is an offence for a person to enter into a contract of insurance or other arrangement under which the person is, or would be, indemnified for a liability to pay a monetary penalty under the Act. Second, it is an offence for a person to provide insurance or a contractual indemnity to another person for such a liability. Third, it is an offence for a person to take the benefit of such insurance or indemnity. Each of these offences carries its own penalty, creating a cascading liability that captures the insured, the insurer, and any intermediary. The provision applies to all monetary penalties under the WHS Act, not just fines imposed following prosecution. It covers penalties imposed by courts, penalty infringement notices issued by inspectors, and any other monetary penalty imposed under the Act. The breadth of the provision means that traditional directors and officers liability policies, general liability policies, and industry-specific indemnity arrangements cannot lawfully cover WHS penalties in NSW.

The distinction between what section 272A prohibits and what remains insurable is important for risk management planning. The prohibition applies exclusively to monetary penalties imposed under the WHS Act. It does not affect workers' compensation insurance, which remains compulsory in all states for businesses that engage workers. It does not affect public liability or professional indemnity insurance that covers civil claims for damages arising from workplace injuries. It does not affect the cost of legal defence in WHS prosecutions — legal expenses insurance remains lawful and available. It does not affect the cost of remedial works ordered by a regulator, such as upgrading plant guarding or improving ventilation systems. The prohibition also does not extend to enforceable undertakings, which are negotiated alternatives to prosecution where the PCBU commits to safety improvement projects in lieu of a penalty. However, businesses must be careful about intercompany arrangements. A parent company that reimburses a subsidiary's WHS penalty, or a related entity that effectively absorbs the penalty through intercompany transfers, may be caught by the provision's broad definition of an arrangement for indemnification. Legal advice should be sought before any intercompany financial arrangement relating to WHS penalties.

The prohibition on insuring WHS penalties is not uniform across Australia. New South Wales has the most explicit provision through section 272A. Queensland's WHS Act includes similar restrictions that prevent insurance coverage for penalties. The Commonwealth WHS Act also prohibits insurance for penalties. Other harmonised jurisdictions — South Australia, Tasmania, the ACT, and the Northern Territory — have provisions based on the model WHS Act that restrict indemnification of penalties but the enforcement mechanisms vary. Victoria, which operates under its own Occupational Health and Safety Act 2004, has separate provisions addressing insurance for penalties. Western Australia adopted the model WHS Act in 2022 and includes provisions restricting insurance coverage for penalties. The practical effect across all jurisdictions is consistent — no reputable insurer offers WHS penalty indemnification in any Australian state or territory. Even in jurisdictions where the statutory prohibition is less explicit, insurance policies universally exclude coverage for criminal fines and penalties as a matter of standard underwriting practice. Businesses should not assume that operating outside NSW provides access to penalty insurance.

The uninsurability of WHS penalties fundamentally changes the risk management calculus for Australian businesses. Under the traditional model, businesses treated safety compliance as one risk among many, with insurance providing a financial backstop for regulatory penalties. Under the current framework, every dollar of every WHS penalty comes directly from the business or the individual officer. This makes investment in preventive safety management the only effective financial protection against penalty exposure. For a body corporate facing a potential Category 2 penalty of $1,731,500, the cost of implementing a comprehensive safety management system — including risk assessment processes, SWMS, incident reporting, training management, and audit programs — represents a fraction of the penalty exposure. For individual officers facing personal penalties of up to $346,300 for Category 2 offences or $3,085,500 for Category 1 offences, the financial case for active safety governance is even more compelling. EHS Atlas provides the systematic safety management platform that creates documented evidence of compliance, making it the most cost-effective protection against an uninsurable penalty.