Firm prosecuted by WorkSafe NZ

A Northland engineering firm was prosecuted by WorkSafe NZ and ordered to pay over $70,000 after an employee injured an index finger which had to be partly amputated.

WorkSafe laid one charge of failing to take steps to ensure the safety of an employee.  Reportedly, the injury happened because there was no rear guard on the machine and also due to a lack of training on its use. 


How would your firms Statutory Liability Insurance respond in a similar situation?

If there is a clear unintentional breach of the Heath & Safety Act and charges are brought against you, then your Statutory Liability policy is triggered.

In the case of the engineering firm there was a breach of the Act.  However the firm had been prosecuted previously for a similar breach.  We expect the insurer would look in to whether the latest breach was unintentional.


What costs are covered by your Statutory Liability insurance?

The Herald reports that the engineering firm in the case was ordered to pay a $61,600 fine, $8,000 in reparation, $1,186 in prosecution costs and $130 in court costs. 

Provided a breach is regarded as unintentional by your insurer, here’s how costs are covered by Statutory Liability Insurance:

- Legal Defence Costs

ARE covered by insurance.

If your business is facing a case against them and your firm pleads guilty, then most likely there will be minimal legal defence costs.

If you decide to fight the case in court the costs for defending yourself would be covered by insurance. 

It’s worth being aware that cases can go on for many, many months.  In the example of the engineering firm the incident occurred Sept-14 and the sentencing outcome was received Feb-17.  Even when you do not go to court, legal costs are incurred over many months.  These would be covered by your policy.

- Fines

ARE NOT covered by insurance.

Fines for breaching the law are not insurable.  If your firm is ordered to pay a fine this comes out of your business's pocket. 

In the case detailed by the Herald, the firm will have to pay $61,600 themselves.

- Prosecution Costs

Some policies cover these, some don’t.

This is a payment to the prosecutors which in most cases will be WorkSafe NZ.  Some insurance policies cover prosecution costs and some don’t.  Your broker can advise you on what your policy covers in this area. 

In this case $1,200 of prosecution costs were ordered.

- Reparation Costs

ARE covered by insurance.

Reparations are paid to the person affected.  This could be an employee, member of the public, a customer, another business or even the council or government.  

As reported by the Herald, the firm was ordered to pay $8,000 in reparation to the injured person.  If your Statutory Liability policy has been triggered, reparation costs are covered.


Impact of the New Health & Safety Act

The Judge in this case noted, “It was a concern that another employee and safety adviser who observed unsafe practices neither prevented them nor reported them to anyone”.

As this incident occurred in 2014 the changes to the Health and Safety at Work Act 2015 (HSWA), which came into effect in April 2016 were not a consideration.  The changes to the Act make health and safety everyone’s responsibility.

It is very likely that the fines would have been higher if this case was brought under the Health and Safety at Work Act 2015.


Next steps for your business

Your business needs to meet your obligations under the HSWA.  This will mean any breaches that do happen are most likely to be considered unintentional by your insurer.  There is good information on meeting your obligations available here.

We recommend a minimum limit of $1m for your Statutory Liability Policy.  But our brokers will evaluate your business's level of risk and work with you to agree a suitable level of cover.

The way Statutory Liability Policies are structured has changed as a result of the Health and Safety at Work Act 2015 coming in to effect.  Your broker can walk you through the changes so you’re up to speed on how your business is covered.



Wach our video Common Statutory Liability Insurance Claims.

Read the Herald article.

Lesley McLaren

About the Author

Name: Lesley McLaren        

Disclaimer: The articles published on this blog are designed to provide general information and do not take into account any individual’s particular circumstances. We recommend that you obtain professional advice on your requirements before making any decision about a financial product.

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