A Q&A with Andrew Tulloch, partner with Colin Biggers and Paisley Lawyers
What are the possible effects of the Banking Royal Commission on the cover for fines and penalties offered by insurers?
The Banking Royal Commission is likely to lead (as it already has) to charges being laid against some individuals and to some significant fines and penalties for both companies and individuals following prosecutions.
At present, it is quite common for professional indemnity and directors’ and officers’ insurance policies to extend cover for civil fines and penalties. The policies generally exclude cover for dishonest, fraudulent or intentional acts or omissions.
However, as the policies generally cover defence costs and often the prosecution is resolved by negotiation, the policy exclusion often does not come into play, as there is no court finding of dishonesty or fraud.
It is possible that the insurance market may look to further restrict cover if, in the aftermath of the Royal Commission, the claims that are payable lead the insurers to review the scope of cover. This may occur if the premiums cannot be increased sufficiently to make the business sufficiently profitable for the insurers.
Are we seeing an increased demand for insurance cover for road carriers to assist with defence of prosecutions for breaches of chain of responsibility obligations under the Heavy Vehicle National Law?
The Heavy Vehicle National Law and Chain of Responsibility obligations have been in place for some time now, although amendments to the regime continue to be made. It is critically important for all road transport operators – but also for major customers of carriers – to be aware of their obligations and to do all they reasonably can be expected to do to comply with the laws.
The regulators are becoming increasingly vigilant and prosecutions are becoming more common. Once again, some specialised insurance products are available which will provide for the costs of defence of prosecution but they are not common and many transport operators are unaware of their availability. A specialised transport insurance broker should be consulted to steer the operator towards the available policy cover.
Are operators facing increasing exposure resulting from the changes to the Australian Consumer Law to now apply to ‘small business’ contracts?
The Australian Consumer Law was amended so that certain standard form contracts entered into or renewed after November 12, 2016 with ‘small businesses’, which are defined as businesses with fewer than 20 employees where the price did not exceed $300,000 if a contract of less than 12 months, can be regarded as void and unenforceable if found to be unfair. There now seems to be a number of such claims being pursued and carrier’s liability insurers are largely expected to carry the cost of such challenges.
This may well see premiums rise as insurers seek to pass on the costs to the industry as their exposure to risk has increased.
The smarter transport operators have implemented changes to their terms and conditions to reduce the risk of an adverse finding or of challenge to the effectiveness of their conditions and are also being more careful to know whether their customer is a small business as this is relevant to the risk they are taking in providing transport services.