Allianz Australia Insurance Ltd v Insurance Australia Ltd trading as Nrma Insurance [2006] ACTSC 35 (21 April 2006)

Last Updated: 22 May 2006

ALLIANZ AUSTRALIA INSURANCE LTD v INSURANCE AUSTRALIA LTD trading as NRMA INSURANCE [2006] ACTSC 35 (21 APRIL 2006)

INSURANCE - double insurance - liability to contribute where workers' compensation deduction made from judgment sum - deduction not authorised by workers' compensation legislation.

WORKERS' COMPENSATION - rehabilitation expenses - settlement negotiations between plaintiff and worker for common law claims - whether agreed settlement amount should include a provision to indemnify the employer for rehabilitation expenses paid - employer's expenditure not recoverable under Workers Compensation Act 1951 (ACT), s 15C - expenditure not received by worker nor categorised as `compensation paid or payable to a person for the benefit of the worker'.

Corporations Law, s 601 AG

Workers Compensation Act 1951 (ACT), s 15C

Motor Traffic Act 1936 (ACT) (repealed), s 54

Workers Compensation Amendment Bill 2006 (ACT), s 13

Albion Insurance Company Limited v Government Insurance Office of New South Wales [1969] HCA 55; (1969) 121 CLR 342

Commercial and General Insurance Company Limited v Government Insurance Office of New South Wales [1973] HCA 51; (1973) 129 CLR 374

Andrikis v The Nominal Defendant (2004) 190 FLR 136

Brooker v Adecco Australia & Adecco Centacom P/L & Australian Capital Territory [2002] ACTSC 71 (26 July 2002)

No. SC 569 of 2005

Judge: Gray J

Supreme Court of the ACT

Date: 21 April 2006

IN THE SUPREME COURT OF THE )

) No. SC 569 of 2005

AUSTRALIAN CAPITAL TERRITORY )

BETWEEN: ALLIANZ AUSTRALIA INSURANCE LTD

Plaintiff

AND: INSURANCE AUSTRALIA LTD trading as NRMA INSURANCE

Defendant

ORDER

Judge: Gray J

Date: 21 April 2006

Place: Canberra

THE COURT ORDERS THAT:

1. The parties be heard further as to the orders that should be made.

1. This is a dispute between two insurance companies as to the application of the principle of double insurance where both insurers indemnified their insured in respect of the same incident which gave rise to a claim in damages against that insured.

2. The plaintiff, Allianz Australia Insurance Ltd (Allianz), was the insurer of an employer of a worker who sued his employer for damages for personal injury arising out of his employment and which also arose out of the use of a motor vehicle. The defendant, Insurance Australia Ltd trading as NRMA Insurance (ICA), was the comprehensive third party insurer of the employer as the owner of the motor vehicle.

The worker's claim

3. The worker's claim against the employer was for the employer's negligence, breach of contract of employment and breach of statutory duty. The incident giving rise to the claim for damages involved the worker lifting a large crate containing "refrigerated parts" off the back of the employer's truck. There were two incidents, one on 19 June 1997 and a similar attempted lift on the next day. The worker alleged injury to his neck and right shoulder and, as a result of the incident, he claimed that he was unable to work. His claim for damages proceeded directly against the plaintiff as the employer company had been deregistered under the Corporations Law after the worker's cause of action arose. Section 601 AG of the Corporations Law provides:

A person may recover from the insurer of a company that is deregistered an amount that was payable to the company under the insurance contract if -

(a) the company had a liability to the person; and

(b) the insurance contract covered that liability immediately before deregistration.

4. Proceedings were taken in this Court by the worker against Allianz on 24 August 2001 (proceedings SC 556 of 2001).

5. On 18 February 2005, the defendant (ICA), by its solicitors, conceded to the plaintiff (Allianz) that "dual insurance" existed, as the letter expressed it, "in relation to both [sic] the motor vehicle accident on 19 June and 20 June 1997".

Double insurance

6. The defendant's concession was an invocation of the principle in respect of which Albion Insurance Company Limited v Government Insurance Office of New South Wales [1969] HCA 55; (1969) 121 CLR 342 stands as authority. That decision is based upon the fact that an assured may be insured against the same risk with two independent insurers. In such a case, the assured cannot recover more than the loss suffered and from which there is an indemnity under each of the policies. In such a case, I understand that the plaintiff and the defendant are agreed that insurers are to contribute equally to the burden of the assured's claim.

The insurance policies

7. In the case of the plaintiff (Allianz) as the worker's compensation insurer, the policy which applied at the time is in terms of Schedule 3 of the Workers Compensation Act 1951 (ACT) (the Act) provided for:

... an unlimited amount in respect of any liability of the employer that may arise -

(a) under the Act; and

(b) independently of the Act;

in respect of any injury to, or death of, any of the employer's employees ...

The liability was expressed as:

... the Employer shall be liable to pay compensation under the Act to or in respect of any person who is or is deemed by the Act to be a worker of such Employer or to pay any other amount in respect of the Employer's liability independently of the Act for any injury to any such person, then and in every such case, the Insurer will indemnify the Employer against all such sums for which the Employer shall be so liable; ...

8. It may be observed that the policy extends an employer's liability beyond the provisions of the Workers Compensation Act 1951 (ACT). It means that the employer is entitled to indemnity in respect of the worker's claims against the employer for damages for negligence, breach of contract and breach of statutory duty arising out of the incidents on 19 and 20 June 1997 and which were the subject of the proceedings taken in this Court on 24 August 2001.

9. The defendant's policy was in terms authorised by the Motor Traffic Act 1936 (ACT), s 54, since repealed. That section provides for insurance of the owner of the particular motor vehicle and the driver jointly and severally against all liability incurred by that owner and driver jointly or by either of them severally, in respect of the death of, or bodily injury to, any person caused by or arising out of the use of the motor vehicle in any part of the Commonwealth.

10. The employer was the owner of the motor vehicle. The expression "arising out of the use of" the motor vehicle is one of wide import. In Commercial and General Insurance Company Limited v Government Insurance Office of New South Wales [1973] HCA 51; (1973) 129 CLR 374, the High Court held that third party insurance indemnity of the kind here under consideration could extend to cover the situation of a stationary vehicle. Menzies, Walsh and Mason JJ commented (at 379):

It seems to us that, as the authorities stand, it is not possible to import some limitation of a general character depending upon the circumstance that, when a person is injured arising out of the use of an insured vehicle, the use at the time is unconnected with locomotion.

The concession by the defendant that double insurance applies is an acknowledgement that the employer was entitled under the compulsory third party policy to be indemnified by the defendant in respect of the employer's liability for damages to the worker arising out of the same incidents covered by the worker's compensation policy held by the plaintiff.

The settlement negotiations

11. After the concession had been made by the defendant, the plaintiff entered into settlement negotiations with the worker. The defendant was not adverse to these negotiations taking place, but maintained that any negotiations should only be inclusive of the sum that had been paid by the worker's compensation insurer for weekly payments and medical expenses and should not include, as part of that inclusive amount, the sum paid by way of rehabilitation expenses.

The rehabilitation expenses

12. The defendant adopted this attitude because of a decision of Master Harper in Andrikis v The Nominal Defendant (2004) 190 FLR 136. In that case, the Master expressed the view that a worker's compensation insurer may not be obliged to indemnify the employer of a worker in respect of a payment of rehabilitation expenses that an employer has paid pursuant to s 15C(1) of the Act, as it was at the time of the Master's decision and as it stood at the relevant time of these proceedings. Section 15C(1) was in Part II A of the Act at the time of the incidents giving rise to the worker's claim and was in these terms:

Where a worker claims compensation for an injury, the employer shall provide the worker with occupational rehabilitation at the employer's expense unless the employer is of the opinion, based on reasonable grounds, that the worker is not entitled to compensation.

Penalty: $5,000.

The whole concept of occupational rehabilitation had been enacted in Part II A of the Act and these provisions were placed in the Act after the general compensation provisions originally enacted in Part II of the Act.

13. In his decision in Andrikis (supra), the Master pointed to the distinction that can be drawn from the provisions of the Act between the concept of payment of compensation to a worker and the implementation of an occupational rehabilitation scheme at the employer's expense. That led him to observe, as far as an insurer's policy with a worker's employer was concerned (at 140 [17]):

The policy, then, indemnifies the employer against liability to a worker for `compensation under the Act' and for `any other amount in respect of the employer's liability independently of the Act for any injury to' the worker. The policy does not on its face indemnify the employer in respect of the cost of occupational rehabilitation under s 15C.

14. Mr Stretton, who appeared for the plaintiff in these proceedings, submitted that the Master's reasoning had overlooked the definition of "compensation" in s 6 of the Act. That definition provides:

"compensation" means an amount payable under this Act in respect to an injury to, or the death of, a person.

However, in my view, that definition only reinforces the conclusion to which the Master came. A payment for the provision of occupational rehabilitation is just that. It is the payment of the employer's expense for rehabilitation being provided to the worker. It is not an amount payable under the Act in respect of an injury to or the death of a person.

15. More importantly, I am unable to see how an employer's payment for occupational rehabilitation is a recoverable amount under the Act. Section 22(1)(b) of the Act provides:

(1) If an injury in respect of which compensation is payable under this Act is caused under circumstances which appear to create a legal liability in some person other than the employer to pay damages in respect of the injury -

...

(b) where the worker receives both amounts under this Act and damages from that other person, he or she shall repay to the employer so much of those amounts as does not exceed the amount of the damages received from that person;

Section 21A(3) of the Act provides:

Where compensation is paid or payable to a person for the benefit of another person, a reference in this Part to a person to whom compensation is paid or payable, as the case may be, shall be read as a reference to the person for whose benefit the compensation is paid or payable.

16. In the case of the provision of occupational rehabilitation at the employer's expense, it cannot be said that the worker has received "an amount under this Act" in terms of s 22(1)(b) of the Act. Nor is it "compensation ... paid or payable to a person for the benefit of another person" so as to invoke s 21A(3) of the Act. The Master reached the same conclusion in Andrikis at 140 [18]. In Brooker v Adecco Australia & Adecco Centacom P/L & Australian Capital Territory [2002] ACTSC 71 (26 July 2002), Connolly J observed that rehabilitation services were an expense related to the worker's compensation process and neither an allowable common law claim nor a recoverable amount pursuant to the worker's compensation payback provisions. Although no reasons were expressed for this conclusion, for the reasons I have given, it is, with respect, a correct conclusion.

17. Mr Stretton called evidence to suggest that workers' compensation insurers had always indemnified employers against their obligation under s 15C of the Act. That does not assist in whether such indemnity was rightly assumed. Mr Stretton also, quite properly, drew my attention to the concern, that the employer might not be indemnified under the policy, as manifesting itself in a proposed amendment to the Act presently before the Legislative Assembly (see Workers Compensation Amendment Bill 2006 (ACT), s 13 (amending Workers Compensation Act 1951, s 70).

18. The issue must be determined on the proper construction of s 15C of the Act as it stood at the time of the worker's proceedings against the plaintiff. In that respect, I accept the reasoning and conclusions of the Master in Andrikis as being correct.

The defendant's qualification to the settlement

19. I have referred to the fact that the defendant purported to require the plaintiff to negotiate a settlement with the worker to be "inclusive" of the sums paid by the plaintiff as the worker's compensation insurer but that the sum not include the monies paid by way of rehabilitation expenses. I do not understand how that could be a proper qualification in respect of the prospective settlement.

20. The worker's claim against the plaintiff did not, and could not, relate to the rehabilitation expenses that the plaintiff had met. Those expenses were not part of any risk that both the plaintiff and the defendant had under their respective policies or obligation to meet. The worker's claim could only be settled on the proper damages due to the worker arising from incidents the subject of the statement of claim. That was the risk that was to be borne by both insurers.

21. The fact that the plaintiff had rights to be repaid from any amount payable to the worker by way of damages is not a matter which is relevant to the assessment of the proper amount in settlement of the worker's claim. The claim fell to be assessed on the claim that the worker had made for damages and for which both the insurers had agreed to share liability.

22. It is true that the plaintiff's solicitors sought agreement to negotiate an offer to the worker inclusive of compensation paid and the defendant's response was that, in its view, the compensation paid should not include the sum paid by the plaintiff as the workers compensation insurer for rehabilitation expenses. Nevertheless, those expenses related to a matter strictly between the plaintiff and the worker having regard to whatever were the plaintiff's rights to have monies repaid to it under s 22 of the Act. The defendant could properly indicate and draw the plaintiff's attention to the fact that rehabilitation expenses were not compensation under the Act and no deduction should be made for them but as they could not be part of the worker's claim at common law, in my view, any issue concerning them was irrelevant to the damages settlement itself.

The settlement of the worker's claim

23. In the result, the plaintiff agreed to settle the worker's claim for damages in the sum of $440,000.00 and judgment was recorded in that amount. There is no reason why, in view of the agreement that double insurance applied, that the defendant should not be liable for one half of that sum. The plaintiff apparently deducted from the judgment sum $149,586.73. That sum included $20,569.13 in expenses for rehabilitative services for the plaintiff. The defendant has paid $209,715.42 to the plaintiff.

24. Although the worker apparently accepted a deduction of $149,586.73 from the judgment sum paid to him by the plaintiff, I consider that deduction was made upon a wrong basis for the reasons that I have given. No deduction from the judgment sum should have been made in respect of the expenses for rehabilitative services. Section 22 of the Act did not require the worker to repay the employer for those expenses. In that circumstance, at this stage, I am not prepared to make a declaration or order that the defendant meet its liability under the double insurance agreement until the plaintiff has redressed the position and paid the worker his proper entitlement under the consent judgment that the worker has obtained. When that is done, there is no reason why the defendant should not honour its obligation under the dual insurance principle that it concedes applies, to pay one half of the settlement sum.

Costs of the proceeding between the worker and plaintiff

25. Apparently, the defendant has not made its contribution to the costs of the proceeding between the worker and the plaintiff.

26. I see no reason why the defendant should not be liable to contribute 50% of the cost order of the proceedings giving rise to the judgment sum. No submission to the contrary was put by the defendant. However, as it is necessary to hear the parties further, having regard to the conclusions set out above, I will defer making that order until the parties are further heard.

27. I will further hear the parties as to the orders that I should make in respect of the reasons that I have expressed.

I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment herein of his

Honour, Justice Gray.

Associate:

Date: 21 April 2006

Counsel for the plaintiff: Mr G Stretton

Solicitor for the plaintiff: Minter Ellison

Counsel for the defendant: Mr M Elkaim SC

Solicitor for the defendant: Moray & Agnew

Date of hearing: 6 April 2006

Date of judgment: 21 April 2006