Case study 1 - The tale of the stolen alcohol and the outlaw bikie gang
The insured entity was a local hotel in north west Victoria. Over a period of approximately 12 months, the owner noticed a significant dip in sales and stock. The owner suspected that the theft of stock may have been attributable to the actions of patrons and installed hidden security cameras in an effort to catch someone in the act. After viewing the footage over the first month of installation, the owner was shocked to discover footage of four of his trusted employees, along with six patrons, blatantly stealing bottles of alcohol from behind the bar and from the stock room.
After viewing the footage over the first month of installation, the owner was shocked to discover footage of four of his trusted employees, along with six patrons, blatantly stealing bottles of alcohol from behind the bar and from the stock room.
The owner reported the theft to the police and all 10 people were charged. During questioning, one of the fraudsters revealed they had been involved in this scheme for the last six years and the alcohol was mainly being offloaded to an outlaw bikie gang who were then selling on the alcohol at a significant profit.
In the meanwhile, the owner was struggling to calculate how much stock had been taken. The theft was reported to the insurer, which appointed a loss assessor, along with a forensic accountant. Given the length of time that the theft had been occurring, it took some three months of forensic analysis to ascertain that the loss amounted to a staggering $506,000.
The police were unable to follow through their enquiries with the members of the bikie gang as the fraudster who first mentioned the involvement of the bikie gang retracted his statement. Not suprisingly, all 10 of the fraudsters combined did not have enough funds to make good the loss and the insured was only able to recoup $103,000 from the fraudsters. Fortunately, the insured was then able to claim the remaining $403,000 along with the investigation costs of $38,000 from the insurer.
*Case study from DUAL Australia.
Case study 2 - occupational safety risks
A restaurant suffered a loss when a young apprentice from a labour hire firm was seriously burnt when he spilt hot liquid on himself when carrying a heavy pot up stairs. He was breaking procedure.
The labour hire firm processed a WorkCover claim and, under the ensuing investigation, the restaurant is currently being investigated, which could result in a hefty fine, and was required to spend tens of thousands of dollars on improvements to its operating procedures.
A restaurant suffered a loss when a young apprentice from a labour hire firm was seriously burnt when he spilt hot liquid on himself when carrying a heavy pot up stairs. He was breaking procedure.
Though the restaurant had a public liability policy, there are exclusions that write out cover for personal injury to employees. Under the policy wording, any contracted or hired-in worker was viewed as an employee.
WorkCover takes care of basic worker medical care and rehabilitation, but it is possible that a later claim might be taken against the company because he was a third party injured on the site.
The restaurant had a management liability policy that covered occupational health and safety defence and investigation for the directors, not the entity.
The directors had fulfilled their obligations in putting in place proper safety procedures and policies, but line management was liable for not enforcing the procedures on the ground.
Fines and penalties were not covered under this policy, only defence costs.
“The policy they have is insufficient for their operations,” says Anna Heyligers of Milne Alexander, currently advising the restaurant. “It’s an easy trap for brokers to be comfortable they are offering some protection to an industry that traditionally wouldn’t be interested in the management liability product,” she says.
Case study 3 - legal cover
Pretesh Patel, National Underwriting Manager, Professional Liability for Wesfarmers, says that cases involving small business clients show the importance of Management Liability cover.
Directors and Officers insurance is an important cover for small business. In one example, a female employee at a manufacturing company complained to its management on several occasions that she felt uncomfortable about sexually explicit emails sent around the office by her male colleagues and their comments directed to her about those emails.
A female employee at a manufacturing company complained to its management on several occasions that she felt uncomfortable about sexually explicit emails sent around the office by her male colleagues and their comments directed to her about those emails
Management didn’t take her complaint seriously and didn’t take steps to stop the emails. The female employee made a complaint to the NSW Anti-Discrimination Board, naming the individual directors of the manufacturing company. The directors eventually settled for $25,000 at a conciliation hearing.
Another significant risk for business can be ameliorated with Statutory Liability cover, Patel says. He cites the example of an industrial accident where some workers were unloading freight from a truck when the load shifted. This caused a hydraulic ram to fall, striking a worker and pinning him against a forklift.He was released but the load moved further, injuring another worker. Both workers suffered grievous bodily harm.
Workplace Health and Safety Queensland investigated and found the company depot’s workplace health and safety systems did not meet the legislative requirements to ensure health and safety.
The maximum penalty for such an offence is $500,000 for a corporation, $100,000 for an individual or two years imprisonment. Following legal advice, the company pleaded guilty and were fined $34,000 plus investigation and court costs.
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