Statutory Liability cover exists to protect businesses that unintentionally breach New Zealand law in a way that could result in prosecution. It ensures the business, its owners, directors and contractors are protected against fines imposed as penalties, alongside cover for the legal costs in defending the business in court.

The costs that can be incurred by these breaches, whether they’re fines, reparations or court costs, can be substantial and put the business at serious risk. The policy usually covers any director, officer of the company, trustee, manager, secretary, employee and the company itself, so this kind of cover should form an important part of any business’ insurance policy.

However, the policy does not cover, among other things, employee contract claims, police prosecutions or IRD proceedings and does not cover any deliberate breach or disregard of statutory requirements.

Examples of Statutory Liability cover at work

Health & Safety at Work Act

While Health & safety fines can’t be insured, the legal defence costs if you’re taken to court can be, as well as any reparations awarded to an injured person.

For example, a building company had sub-contracted another builder to complete an extension to a house. A Worksafe inspector was reviewing the site and noticed the builder was wearing jandals. Despite receiving a warning the same builder turned up the next day in jandals again, and Worksafe brought a prosecution against the builder and the sub-contractor, which resulted in the sub-contractor receiving a substantial fine. While the fines weren’t insured, the builder’s substantial legal defence costs were covered.

Resource Management Act

A farmer stored fuel in an old storage tank that suffered a leak and spilled a substantial amount of fuel into a nearby stream, resulting in the farmer being prosecuted by his local council under the Resource Management Act. The farmer plead guilty to the charges and was fined $230,000 under the Resource Management Act. His fine was covered by his Statutory Liability insurance, as well as the cost of his defence.

Building Act

A commercial building owner had been trying to lease his building without success. The building was in a commercial zone and half of the building was already being used for commercial purposes, so he let out the remaining part of the building for residential purposes and allowed a family to move in. When it was discovered by his local authority he was prosecuted under the building act, but had his fines and court costs covered by his Statutory Liability insurance.

Fair Trading Act

A large retailer was running a campaign offering discounted products nationwide. The Commerce Commission received a number of complaints from the public that the prices advertised were not accurate, and prosecuted the retailer for a substantial fine. The retailer pleaded guilty and was fined $800,000, along with a $70,000 court cost. In this case both the fine and the defence cost was covered by their Statutory Liability insurance.

If you’d like to know more about Statutory Liability cover and how it can protect your business, please talk to your AIB Group broker today.