Authored by Patrick Bracher.
In March 2026, the Australian Federal Court issued an order precluding a company executive from calling upon any insurance policy to indemnify any penalty imposed on him for contraventions of cartel provisions under Australian competition laws, for which he was responsible.
After the contraventions, the assets of the contravening company had been sold. A penalty order of AUS$ 5 million was granted against the company and AUS$1 million against the responsible executive. The principles relating to civil penalties in Australia provide that the main purposes of a penalty is deterrence of further contraventions of the law. Deterrence is the primary objective to be taken into account in assessing the appropriate penalty.
The executive had notified his insurers regarding the proceedings under the company’s management liability policy. Details of the policy were unknown to the court which was concerned it may include cover for any pecuniary penalty the executive was required to pay.
The court was satisfied that it was appropriate that a non-indemnification order be made. The penalty imposed on the executive would have no real deterrent effect if he did not have to pay it himself. That would in one foul swoop undermine both specific and general deterrence. The objective of deterrence was especially important in relation to the executive given that he was, on the available evidence, the driving force for most of the misconduct and stood to benefit from that conduct.
On facts of a deliberate contravention of the law, it is unlikely that any insurance policy would indemnify the payment of the penalty.
In South Africa, an undertaking by an insurer to indemnity a penalty imposed under new section 174 of the Financial Sector Regulation Act is void (unless allowed by a joint standard of which there is currently none).
Australian Competition and Consumer Commission v Qteq (Pty) Ltd (Penalty) [2026] FCA 356