Australian regulators and courts are increasingly using fines and penalties as an accountability mechanism for corporate wrongdoing. The ASIC, APRA and AUSTRAC have focused on financial misconduct, greenwashing and cyber resilience issues. Recent legislative reforms such as the Financial Accountability Regime Act 2023 (Cth) (FAR Act) and the new Aged Care Act 2024 have introduced or expanded the scope of personal accountability for individuals.
For the first six months of 2024, over $32.2 million in penalties was imposed by ASIC and ordered by Australian Courts.[1] This includes a historic $11.3 million fine on Mercer for greenwashing conduct, a $10 million fine against Macquarie Bank Ltd for failing to properly monitor third-party fee withdrawals from customers’ accounts and over $1.7 million in infringement notices issued and paid. 14 individuals have also been disqualified from directing companies due to ASIC’s enforcement activity.[2] In 2023, the Federal Court of Australia ordered Getswift Limited (in liq) to pay $15 million and two of its directors to pay a combined sum of $3 million in fines, for contraventions of continuous disclosure obligations and breaches of the directors’ duties.[3]
Directors and officers of The Star Entertainment Group (Star) have been and continue to be prosecuted by ASIC and the Courts. On 24 February 2025, two former executives of Star were ordered to pay $250,000 in penalties by the Federal Court of Australia, after admitting to breaches of their duties in proceedings brough by ASIC.[4]
AUSTRAC have also secured significant penalties for breaches of Australia’s anti-money laundering and counter-terrorism (AML/CTF) legislation. This includes a $1.3 billion penalty against Westpac secured in September 2020 and more recently, a $67 million penalty secured against SkyCity Adelaide Pty Ltd in June 2024.[5]
The insurability of fines and penalties may be a saving grace for many individuals and entities with this exposure. In some instances, a Deed of Access and Indemnity may afford some indemnification for individuals. Here, we examine the insurability of fines and penalties, including where cover for certain fines is prohibited by law and what the Courts have said on this issue.
In Australia, cover is generally available for fines and penalties issued against entities and individuals, often under Directors & Officers (D&O) or Statutory Liability policies and in some cases under a Professional Indemnity policy. However, this cover is commonly not available if the fine or penalty is ‘uninsurable at law’[6].
Where an insurance policy covers a fine or penalty, the scope of that cover will be influenced by a range of factors, including:
The Corporations Act 2001 (Cth) prohibits the indemnification of directors and officers of companies for certain conduct and when they act in certain roles. For example, section 199B prohibits indemnification of a director or officer for liability arising from wilful breaches of their duties to the company or contraventions of provisions[7] relating to the improper use of their position or improper use of information to gain a personal advantage or cause detriment to the company. Exclusions in D&O insurance policies typically mirror these provisions.
As at the end of 2024, industrial manslaughter is now recognised as an offence across all Australian states and territories, prohibiting the indemnification of penalties for body corporates and individuals.
The FAR Act, which applies to the banking, insurance and superannuation industries from 24 March 2025, prohibits an ‘accountable entity’ from being indemnified for breaching its obligations under FAR.[8] There is no equivalent prohibition for accountable persons.
It is worth noting that the restrictions for industrial manslaughter or under the FAR Act do not prohibit cover being provided for legal costs incurred in defending the relevant proceedings.
In Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2018) 262 CLR 157 Mr Joseph Myles, an officer of the CFMEU, was prosecuted for breaches of the Fair Work Act 2009 (Cth) (FW Act) when he participated in a blockade at a construction site in Maribyrnong that led to the spoiling of large quantities of wet concrete. Justice Mortimer of the Federal Court made a ‘personal payment’ order against Mr Myles and imposed a ‘non-indemnification’ order prohibiting the CFMEU from indemnifying Mr Myles for the penalties imposed on him.
On appeal, the High Court held that although s546 of the FW Act authorised a Court to make an order against Mr Myles for personal payment of a fine, that section did not allow the ‘non-indemnification’ orders as the orders were made against parties that were not the contravener (i.e. the CFMEU) of the FW Act.[9]
In August 2023, the Federal Court made a non-indemnification order against Jason Ellis, a senior executive of Bluescope Steel Ltd (Bluescope) in proceedings brought by the ACCC regarding Bluescope and Mr Ellis inducing competitors to enter price-fixing agreements.[10] The Court imposed a $57.5 million penalty on Bluescope along with a $575,000 fine on Mr Ellis for multiple breaches of cartel conduct provisions in the Competition and Consumer Act 2010 (CCA). Justice O’Bryan said that the deterrent effect of CCA fines should not be undermined ‘by the ability of company directors and officers to insure against the financial cost of the penalty’.[11]
In each of these cases, effective deterrence was a key factor in the making of personal payment orders.
Organisations and their directors should continue to monitor this space. The evolving legislative landscape and the increased willingness of courts to make personal payment orders highlights the importance of ensuring coverage is available for these exposures where possible. Insurer appetite and loss experience are likely to impact the breadth of cover that may be offered. Limitations imposed by insurers may include the imposition of sub-limits, high deductibles, non-aggregation of conduct or total exclusions for certain types of fines and penalties.
Early engagement with Willis will assist in clarifying the protections available for fines and penalties under various policies and will allow your broker to procure insurance solutions tailored to your industry and business needs.
