15.1An additional issue to those raised in the Issues Paper is the availability of insurance and indemnification to a defendant to meet the costs of defending pecuniary penalty proceedings, and any penalty imposed. A number of legislative design questions arise, including:
In its absence, capable and talented individuals may be unwilling to join boards of directors, particularly as non-executive directors, or may become excessively risk averse on boards, to the detriment of the individual company and the broader commercial community. D & O [Directors and Officers] insurance also recognises that company officers may become personally liable in circumstances where they have scant moral responsibility … On the other hand however, there is a legitimate public policy concern that, in certain circumstances, the availability of D & O insurance can negate the very reasons why personal liability rather than merely corporate liability is imposed.
15.4The absence of specific provisions in the pecuniary penalty statute confirming whether a penalty may be insured or indemnified against creates uncertainties for regulators and market participants, as the existing law concerning insurance or indemnities for criminal liability is not necessarily fit for purpose in the context of pecuniary penalties. Reserving the issue for analysis by the courts where the issue arises in a particular case does not provide sufficient regulatory certainty.
15.5This chapter examines the policy issues concerning indemnities and insurance for pecuniary penalties. We conclude that, for greater regulatory certainty, pecuniary penalty statutes should expressly provide that there is no bar on insurance or indemnification for pecuniary penalty liability, unless it is necessary to specify any prohibition or limitation in the context of the particular pecuniary penalty regime. Policymakers should consider whether there is any case to restrict the availability of insurance or indemnities, based on the underlying objectives of the particular regime.