01 / The meaning
What it means.
Do not treat statutory liability insurance as a promise to pay every fine. Some laws expressly prohibit insurance or indemnity for particular penalties. For example, New South Wales work health and safety legislation restricts arrangements that avoid WHS penalties. Other jurisdictions have their own provisions. A policy cannot make a prohibited indemnity lawful simply by describing it as cover.
Separate the penalty itself from investigation costs, legal defence, compensation and remedial work. These are different amounts and may be treated differently by both the law and the wording. Conduct exclusions, knowledge of a breach and insurer consent can also matter. A regulator’s notice should be reviewed promptly with an appropriately qualified legal adviser while any potential insurance notification is made within the required process.
02 / Put it in context
A practical example.
Hypothetical example: a construction company receives a NSW WHS prosecution notice. It asks advisers to distinguish any lawful defence-cost cover from the fine itself, rather than assuming its management liability policy can reimburse the penalty.
This example illustrates the term. It does not predict a claim outcome.
03 / Read the detail
What to check.
- Identify the exact law, jurisdiction and type of sanction.
- Check express insurance or indemnity prohibitions for that sanction.
- Review defence costs separately from fines and remediation expenses.
04 / Start a useful conversation
A question for your broker.
Which amounts can lawfully be insured here, and which does the actual wording include?
05 / Connect the terms
Keep the meaning in context.
06 / Apply it to your business
Related insurance guides.
Further reading
Read the source guidance alongside the relevant policy wording.
General information only. This does not take into account your objectives, financial situation or needs. Before acting, consider whether the information is appropriate for you. Cover is subject to insurer acceptance and the policy terms, conditions, limits and exclusions. Read the Financial Services Guide and the relevant PDS (where applicable) and/or policy wording before deciding.
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