Farm Forestry New Zealand

Your obligations as a PCBU

Jo McIntosh, New Zealand Tree Grower May 2019.

Are you aware of your obligations as a person conducting a business or undertaking – with the acronym PCBU − under the recent health and safety legislation? This is one of the key questions any liability insurer will ask before offering forest owners liability insurance. I am surprised, and worried by how many people answer no to this question.

It has been over three years since the Health and Safety at Work Act came into force and this Act has changed the landscape of health and safety litigation in New Zealand for ever. It is important that forest owners understand their obligations. The legislation defines what is a workplace, who is a PCBU and what the obligations are.

Uninsurable fines

The Health and Safety at Work Act also sets out the fines and penalties for getting it wrong. These have increased substantially from the previous regime. Importantly you cannot purchase insurance for these fines.

There is now a three-tiered liability regime for penalties imposed on individuals and overall, a significant increase in the maximum penalty levels over the previous law to sanction and deter duty holders from breaching their workplace health and safety duties.

• Tier 1 Reckless conduct − fines up to $600,000 for a director and up to five years in jail with a maximum fine of $3 million for the entity
• Tier 2 Exposing a person to a risk of death, serious injury or illness − fines up to $300,000 for a director and up to $1.5 million for the entity
• Tier 3 Breach of duty − fines up to $100,000 for a director and up to $500,000 for the entity. In addition, it is now an offence to indemnify a person or entity for a fine or infringement fee with a maximum $250,000 fine applying for breaching the rule.

This being said, why am I worried and why do insurers even care? Apart from the fact that I agree that work place health and safety is important, and that everyone who goes to work deserves to go home unharmed, the effect on a business which has a serious harm incident can be catastrophic.

The role of insurance

While you cannot insure fines, insurance still plays a vital role. Statutory liability insurance still extends to cover court-awarded reparations and defence costs relating to a WorkSafe prosecution.

Let us take a step back and determine how we got here? It will come as no surprise to most of you that the forest industry is over represented in work place injuries. According to WorkSafe’s latest data there were six forestry fatalities in the period January to December 2018 and things are tracking the wrong way with a 7.5 per cent rise in injuries per 1,000 full time equivalents.

A review of their online data of WorkSafe fatalities makes for a sobering read. WorkSafe go on to say that the Ministry is resolute in its commitment to work in partnership with industries to reduce the number of workplace fatalities, injuries and occupational disease.

WorkSafe currently have a target of reducing fatal and serious non-fatal work-related injury by 25 per cent by the year 2020. As a result, we expect the focus on health and safety to continue to be high.

Who carries the risk?

One comment I often get from forest owners is that they employ a contractor to carry out all the work in their forests, the assumption being that as they are not the ones doing the physical work, they do not have the risk. One of the major changes that came into to play in 2015 is to clearly set out that everyone involved in a work place has a role. Where there are multiple PCBUs, they must discharge their overlapping responsibilities to the extent they have the ability to influence and control the matter.

There are some very handy guides on the WorkSafe website which set out practical ways in which you as a forest owner can manage these obligations. For example, there are sections detailing the duties of a principal which talks about your duty to engage competent, safe contractors, to give contractors the information they need to keep healthy and safe while working, to monitor contractors’ health and safety performance and coordinate contractors’ activities. WorkSafe recommends that when a forest owner chooses a contractor, they verify that the contractor has a documented safety management system in place before beginning operations and to periodically audit the systems in place.

Reparation payments

Insurers and lawyers have been watching cases as they come to court with great interest to see how the judicial system interprets the new Act. Will they apply the full weight of the law and apply the maximum penalties?

One developing area is in respect of reparations to victims. Paying reparations to victims or their families is not new. However, it is becoming more common for those reparations to be substantial. Part of the reason behind this is another legislative change which took place in 2014. The change introduced was to the Sentencing Amendment Act and allowed courts to order reparations to top up the 20 per cent of earnings not covered by ACC.

An example of this is the recent Oceana Gold case. The Oceana Gold matter involved the tragic death of a mine worker whose vehicle fell off a 15-metre drop. Reparations to his family were an important consideration. The Sentencing Amendment Act defines a victim to include a member of the immediate family of the person who dies. In the Oceana Gold case the courts considered that the deceased had a salary of around $100,000. An actuary provided a report that estimated projected lost earnings over the course of his life to be between $700,000 and $2.77 million.

In this case, Oceana Gold had already made payments to the victim’s family of $450,000, along with other payments totalling $200,000 to the deceased employee’s partner and child, and due to this the courts advised that no further payments were required. It appears that Oceana Gold had life insurance in place on the employee.

This case brings out the benefit of holding life and trauma insurance for staff. Group life policies and group trauma policies are more cost effective than they used to be and I would encourage anyone with staff to consider having such cover. Apart from being a good citizen and the right thing to do, it is shown to help reduce exposure to high fines and reparations in the event of a loss.

My final comment is that it is not all bad news, while there is an increased risk there are some relatively simple things you can do to manage this risk. There are some very good systems readily available on line to assist you with this especially −

• Understand your obligations as a PCBU
• Manage and document your response to your obligations
• Consider having group life insurance and trauma insurance on your staff and yourself.

As with all risk, get good advice.

Jo McIntosh is an Executive Director of Aon and specialises in insurance for forestry and horticulture.