Professional Indemnity Implications of New OH&S Laws

February 2012

Professional negligence has traditionally given rise to claims for liability to pay compensation however recent legislative changes increase the prospect that a breach of a professional duty of care can give rise to criminal prosecution which has significant implications for professionals in the construction industry.

State and Territory health and safety legislation is being harmonised in line with the model Work Health and Safety Act 2011 (Cth) (WHS Act). The WHS Act aims to improve safety outcomes in workplaces, reduce compliance costs for businesses, and provides a balanced and nationally consistent approach to work health and safety. Implementation commenced on 1 January 2012 in ACT, NT, NSW and QLD with VIC, WA & SA delaying implementation. The WHS Act imposes obligations on businesses to protect the health and safety of their workers and other people affected by the workplace. 

To understand how these reforms operate it is necessary to identify who they apply to. Importantly, the WHS Act imposes a primary duty of care on persons conducting a business or undertaking (PCBU). This term has been used to encompass employers, principal contractors, head contractors and franchisors. The Act requires a PCBU, so far as is reasonably practicable, to protect the health and safety of its workers and those affected by the workplace. The term "employee" has been replaced by the term "worker" to broaden the scope of responsibility owed by the PCBU to include volunteers, sub contractors, apprentices and others. 

The scope of the Act includes those considered as "designers" of plant, substances and structures to be used as workplaces and imposes significant obligations in relation to ensuring the design is without certain risks. Section 22 is a key section of the WHS Act for building professionals and considers the duties of PCBU’s that design plant, substances or structures. We have extracted some key elements as follows: 

S22(2) The designer must ensure, so far as is reasonably practicable, that the plant, substance or structure is designed to be without risks to the health and safety of persons:

(a) who, at a workplace, use the plant, substance or structure for a purpose for which it was designed; or

(d) who construct the structure at a workplace; or

(e) who carry out any reasonably foreseeable activity at a workplace in relation to:

(iii) the manufacture, assembly or use of the structure for a purpose for which it was designed or the proper demolition or disposal of the structure; or

The use of absolute terms such as "ensure" and "without risk" establish onerous and far reaching obligations with the qualification of "reasonably practicable" offering some concession.
Section 22 also imposes obligations upon designers to provide information to relevant parties:

S22 (4) The designer must give adequate information to each person who is provided with the design for the purpose of giving effect to it concerning:

(a) each purpose for which the plant, substance or structure was designed; and

(c) any conditions necessary to ensure that the plant, substance or structure is without risks to health and safety when used for a purpose for which it was designed or when carrying out any activity referred to in subsection (2)(a) to (e).

(5) The designer, on request, must, so far as is reasonably practicable, give current relevant information on the matters referred to in subsection (4) to a person who carries out, or is to carry out, any of the activities referred to in subsection (2)(a) to (e).

The above imposes obligations upon designers in relation to conveying purpose of the design of a structure and any conditions necessary for the design to be without risk to the health and safety of persons involved with construction as well as occupation of the structure. 

Given that the most severe penalties available are $3,000,000 for corporations and $300,000 for individuals and up to five years imprisonment, it has never been more crucial to understand one’s obligations in relation to health and safety. Where possible designers should develop and implement risk management policies that identify and deal with these obligations and also consider arranging insurance cover for the legal costs associated with a criminal prosecution. Traditionally, professional indemnity insurance policies only responded to claims for civil liabilities (compensation), however in response to increasing obligations under health and safety legislation, some insurers are willing to provide extensions to cover legal costs incurred in defence of a criminal prosecution arising from the conduct of the professional business. For further information please contact one of our helpful insurance consultants at BRIC.

To the extent that any of the above content constitutes advice, it is general advice without reference to your needs or objectives and therefore cannot be relied upon. Before acting on the above information you should obtain advice specific to your needs.

 

 
 

BOVILL RISK & INSURANCE CONSULTANTS

Specialist Insurance Brokers