Civil Penalties (Insurable at Law)

A civil penalty is a money sanction set by law for a regulatory breach. It differs from a criminal fine because it comes from a civil case, not a criminal one. Whether a civil penalty can actually be insured in Australia is not a simple yes or no question. Some statutes now ban insuring or paying out for specific named penalties. For example, some work health and safety laws ban insurance for any money penalty under those particular laws. Where no statute bans it outright, a court still has the power to block a payout on public policy grounds. Courts have blocked a payout where the person acted in a deliberate, dishonest, or reckless way. The reasoning given is that a payout would strip the penalty of its sting. Courts have allowed a payout where the conduct in question was not deliberate or dishonest. Because of this, a Management Liability policy usually covers a civil penalty only 'to the extent insurable at law.' This wording leaves the insurability question to the insurer and the courts to work out. It also means cover for any single penalty is never a sure or settled thing.

A civil penalty is a money sanction set by law for a regulatory breach. It differs from a criminal fine because it comes from a civil case, not a criminal one. Whether a civil penalty can actually be insured in Australia is not a simple yes or no question. Some statutes now ban insuring or paying out for specific named penalties. For example, some work health and safety laws ban insurance for any money penalty under those particular laws. Where no statute bans it outright, a court still has the power to block a payout on public policy grounds. Courts have blocked a payout where the person acted in a deliberate, dishonest, or reckless way. The reasoning given is that a payout would strip the penalty of its sting. Courts have allowed a payout where the conduct in question was not deliberate or dishonest. Because of this, a Management Liability policy usually covers a civil penalty only 'to the extent insurable at law.' This wording leaves the insurability question to the insurer and the courts to work out. It also means cover for any single penalty is never a sure or settled thing.