Chain of Responsibility (CoR) Laws Impose Major New Obligations on Transport

Amendments to the Heavy Vehicle National Law came into place on 1 October 2018 and put into place a ‘Chain of Responsibility’ (CoR) for the heavy vehicle transport supply chain in all states and territories in Australia, excluding Western Australia^[1] and Northern Territory.   

These laws create a ‘chain of responsibility’ that stretches across all parties with an interest in the transport of goods by heavy vehicles – not just the driver of the vehicle. 

All parties in the ‘chain’ with control or influence over transport activities are responsible for complying with the CoR laws.  Each of them now must take reasonably practicable steps to prevent breaches.

Importantly, it does not matter for example whether or not they carried or loaded the materials onto a vehicle - one party’s breach can mean that every other party is held responsible.

The CoR laws impose an obligation on managers to control and minimise risks involved in transport operations.  Breach for reckless conduct under the laws can attract fines of up to $3 million for a corporation, with up to five years imprisonment and fines of $300,000 for individuals.  

Responsibility for complying cannot be delegated nor can liability be contracted out of. 

CoR LAWS APPLY WIDELY

The CoR laws apply to more than transport and heavy vehicles.  They can capture a broad range of transport activities, including:

• Operator / manager / schedule responsibilities
• Consignor / consignee responsibilities
• Loading or unloading / packing or unpacking responsibilities
• Driving / owner-driver responsibilities
• Use or maintenance of a vehicle
• Scheduling transport
• Receiving goods

WHAT NEEDS TO BE DONE?

The CoR laws impose new compliance obligations at operational, organisational and boardroom level.  Organisations must be able to demonstrate that all reasonable steps were undertaken or that everything reasonably practicable was done to prevent a breach. 

This may involve implementing, maintaining and monitoring clear CoR compliance policies and expanded risk management and audit processes.   

You will also need to consider terms in supply chain contracts to reflect compliance with the laws. 

INSURANCE COVERAGE CONSIDERATIONS

Some relief for breaches of the CoR Laws, including for legal costs and expenses incurred in defending a prosecution and any associated fines and penalties, may be available under a Directors and Officers (D&O) Liability Policy. Cover under D&O Policies is however typically only available for breaches by the directors or other individuals concerned in the management of the company. No insurance cover is generally available for breaches by the Company itself. Further, cover may be qualified by the operation of an exclusion for deliberate and intentional acts and/or an exclusion for bodily injury and property damage, which most D&O policies contain.

Similarly, insurance cover may also be available under a Statutory Liability (SL) Policy which covers monetary fines and penalties payable as a result of a breach of legislation, including the associated legal costs and expenses. Unlike a D&O Policy, under a SL Policy, cover will typically be available to the company as well as its employees including directors and officers. Cover may however be qualified by the operation of, in particular, an exclusion for intentional acts, gross negligence or recklessness or an exclusion for wrongful acts relating to the regulation of vehicular traffic. Breach of directors duties pursuant to sections 182 and 183 of the Corporations Act 2001 (Cth) are also likely to be excluded.

Finally, it is important to note that no insurance policy will cover matters considered uninsurable at law (whether the policy provides such a term or not). This is for reasons of public policy, on the basis that a person may not benefit from his/her own wrong and, by extension, may not be indemnified against the consequences of that wrong. As a result it is unlikely that cover will be available for fines or penalties awarded pursuant to any offence committed with intent, conscious awareness or reckless or wilful indifference.

The position is less clear in relation to strict liability offences, although most commentators suggest that such offences are insurable. Ultimately cover may depend on whether there is, in fact, an element of intent, recklessness or wilfulness attributable to a person guilty of such an offence, notwithstanding that the offence is one of strict liability. Covered legal costs may also need to be repaid upon any finding of intent or guilt.

In addition to the assistance Marsh can provide from an insurance and risk perspective, you may wish to seek advice from your legal advisor on the CoR laws and may require for example legal advice as to whether a particular risk specific to your business is insurable at law.

As policy terms and conditions can vary significantly, please contact Melita Simic, Managing Principal – FINPRO, if you would like to discuss the extent of cover available under a SL or D&O Policy.

NEXT STEPS AND RESOURCES

Where you have an interest in the transport of goods by heavy vehicles and may be affected by the CoR laws you should seek expert insurance advice on how they may apply to your business, and what steps you can take to manage your liability risk.

The National Heavy Vehicle Regulator as well as the National Transport Commission of Australia have information available on their respective web pages.

[1] Western Australia already had its own CoR laws. These are not addressed in this article.

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