Board Due Diligence: Psychosocial Compliance and Insurance Obligations
Each year, two in five Australians report leaving their jobs due to a poor mental health environment. There is growing awareness of the significance of psychological hazards and injuries in the workplace. By 2030 it is expected that a third of all injury claims will be mental injury claims.
Below we outline some key considerations for boards and companies regarding this growing concern.
What is a psychosocial hazard?
Psychosocial hazard has a broad meaning and is defined as any factor or factors in:
the work design, the system of work, the carrying out of the work, and personal or work-related interactions that may arise in the working environment and may cause an employee to experience one or more negative psychological responses that create a risk to their health and safety.
The list of workplace psychosocial hazards is endless, but the main hazards for a company to identify are listed below:
Work Health and Safety Laws:
Most state and territory governments and the federal government have responded in similar ways to the challenge of psychological harm. They have either issued, or are considering, regulations that place specific obligations on a duty holder1 beyond the general health and safety obligations and, on breach, will expose the duty holder to potentially criminal prosecution.
Work Health and Safety (WHS) laws require that workers should be given the highest practical level of protection against harm to their health and safety from hazards and risks arising from work.
WHS laws include a definition of ‘health’ which means both physical and psychological health – this includes psychosocial hazards.
Under WHS laws duty holders must comply with an approved code of practice, so far as is reasonably practicable, or follow another method that provides an equal or higher standard of health and safety than is outlined in the code.
Most governments have issued codes of practice which act as guidance to duty holders, and generally would inform a regulator or a court of relevant standards and may provide a defence to a defendant if the code is complied with.
Codes of Practice for managing the risk of psychosocial hazards at work are available at state and national level. All of which support WHS Regulations and provide practical guidance on how to achieve the standards of health, safety and wellbeing required under WHS Acts and WHS Regulations:
Risk Management Strategies
- Implementation of a system that identifies psychosocial hazards in the workplace
- Risk Assessments - What is the likelihood of this hazard occurring? How could this harm people?
- Encourage reporting within the business
- Develop measures to control identified risk in consultation with employees
- Monitor and review the above steps on a continuous basis
Insurance Policy Interpretation
Many insurers are starting to incorporate “psychosocial injury” in their definitions of “abuse”. Appetite for “abuse”, particularly “sexual abuse and molestation” is very limited and is expressly intended to be excluded from cover under most general liability policies. The amended drafting of the abuse definition, however, has clearly had a significantly detrimental impact for policyholders.
A sample of the exclusion and definition of abuse is below:
This Policy does not indemnify the Insured or any third party beneficiary for any liability directly or indirectly caused by, arising out of or in any way connected with Abuse.
For the purpose of this Exclusion Abuse means: (i) acts of hurting or injuring mentally or physically by maltreatment or ill-use (ii) acts of forcing sexual activity, rape, or molestation (iii) repeated or continuing contemptuous coarse or insulting words or behaviours.
Different jobs encompass different psychosocial risk profiles, requiring different approaches and levels of support from employers. Bellrock can assist not only with policy placement and reviews but also with strategies around risk maturity, and policies and procedures that will ultimately define your risk profile to the insurance market and the cover that is available to you.
For more information about psychosocial hazard policy coverage, please contact a Bellrock Advisor via the form below.