WA Insurance update – Issue 2

In 2013 William Hurley was involved in two accidents while riding his Harley Davidson motorcycle. On the first occasion, Rosalia Lang collided with Mr Hurley’s motorcycle when she changed lanes, causing him to be thrown from it. On the second occasion, Shih Jay Lim failed to give way at an intersection, causing Mr Hurley to brake heavily and again be thrown from his motorcycle.

Mr Hurley claimed to have suffered injuries, loss and damage as a result of one or both defendants’ negligence. While the defendants admitted driving negligently, they denied the extent of his claim and alleged a failure to mitigate by failing to fully utilise his retained earning capacity and to make reasonable attempts to seek other work.

The first accident resulted in a fractured right wrist, abrasions and grazes while the second accident resulted in a 25 centimetre laceration to the left calf, a left elbow wound and torn ligaments and associated meniscal tearing of the left knee.

The defendants contended that Mr Hurley regained full working capacity after the first accident, but was not exercising his full earning capacity at the time of the second accident and therefore should only be entitled to a modest lump sum. Relevantly, Mr Hurley’s work history was characterised by brief periods of employment in various roles (averaging four months) and he voluntarily ceased fly-in/fly-out work shortly before the first accident.

Judge Eaton considered whether, as a result of the accidents, Mr Hurley had been rendered less capable of earning an income. It was necessary for His Honour to identify what capacity had been lost and what economic consequences would probably flow from that loss.

Judge Eaton found that Mr Hurley was equivocal about fully exercising his earning capacity prior to the second accident and therefore any award must be modest and speculative. His Honour awarded $15,000 for this period.

His Honour’s assessment of Mr Hurley’s credibility was that he tended to exaggerate the impact of his injuries and pain, and exaggerated in describing the requirements of his job of serviceman. Given his tendency for exaggeration and deceit, his Honour was not prepared to base an assessment of Mr Hurley’s past and future loss of earning capacity on Mr Hurley’s own evidence about his abilities or on evidence from doctors reliant on his.

Judge Eaton preferred the evidence of a medical specialist who had full knowledge of the role of serviceman. Loss consequent on the second accident was assessed at $52,000, being six months of the income he would have earned in the year before the first accident had he not voluntarily ceased employment.

General damages in respect of each accident were assessed at 7.5% and 12.5% of a most extreme case respectively. The first accident had no long term impact – after wrist surgery, Mr Hurley made a good recovery and suffered little more than reduced strength in the right wrist. The second accident had a longer impact – his calf wound was problematic and he required arthroscopic knee surgery and post-operative physiotherapy and exercise. Mr Hurley’s total damages award was $136,109.20.

This decision highlights the significance of recognising and raising failure to mitigate defences when plaintiffs do not exercise their full earning capacity following their injury. It also emphasises the importance of briefing medical specialists who have full knowledge of the requirements of the occupation in which it is claimed the plaintiff would have returned to after the injury.

Hurley v Lang [2016] WADC 117

Workplace injuries

Who watches the watcher? – No duty on labour hire company to supervise host employer’s enforcement of safe system

A recent decision of the NSW Court of Appeal may have relevance in WA when determining the respective duties of host employers and labour hire companies.

Sandra Fullick was employed by a labour hire company, Integrated Pty Ltd, and was placed as a production operator with a host employer, Jurox Pty Ltd. Ms Fullick injured her back at work, emptying a 25kg bag of dextrose into a hopper. Ms Fullick was trained in Jurox’s system of work for this task, which was found by the primary judge to be safe (if followed correctly). However, the primary judge found that Jurox had breached its duty of care in failing to adequately supervise Ms Fullick in following the designed system.

Justice of Appeal Simpson dismissed Jurox’s appeal and found that there was no evidence of any formalised system of supervision, nor of any Jurox employee who bore the responsibility of ensuring that Ms Fullick understood her training at the induction and complied with it. Justice Simpson concluded that had Ms Fullick received even a modicum of supervision, it would have exposed Ms Fullick’s incorrect method, which would have led to a correction of her technique and avoided Ms Fullick’s injury. Constant supervision was not required, but it was sufficient for Jurox to pay reasonable attention to ensure that Ms Fullick was applying Jurox’s system of work when she was first instructed on the use of the machine and to ensure that she had absorbed the instruction.

Justice Simpson found that there was no contributory negligence, as Ms Fullick routinely performed the unsafe method . The fact that her incorrect technique went unobserved and unremarked in the presence of her instructor led Her Honour to conclude that Ms Fullick’s incorrect technique resulted not from her carelessness or conscious departure from what she had been taught, but from the entrenchment of a practice that ought to have been easily corrected at an earlier stage.

Jurox also sought contribution from Ms Fullick’s employer, Integrated. Justice Simpson held that reasonable care on the part of Integrated did not extend to supervising Jurox’s supervisory regime, or indeed to take any precautions to ensure that Jurox supervised its own system of work. Her Honour also found that any audit that Integrated undertook of Jurox’s system of work would not have revealed Jurox’s failure to supervise its employees, given the finding that Jurox did have a safe system of work in place.

This case highlights that host employers will be held to the same onerous standard of care as employers to not just devise a safe system of work, but to also supervise compliance with the system.

This decision is significant as the majority defined the scope of the duty owed by a labour hire company does not extend to ensuring that the host employer enforces its system of work. The WA Court of Appeal may in due course consider this judgment in light of previous decisions (including its own decision in Parlin Pty Ltd v Choiceone Pty Ltd [2012] WASCA 19) applying the non-delegable duty of care more rigidly, following High Court decisions such as Andar Transport Pty Ltd v Brambles Ltd.

Jurox Pty Ltd v Fullick [2016] NSWCA 180

You’re not the boss of me: principal not liable for injury to subcontractor

The NSW Court of Appeal has dismissed an appeal by a worker seeking a finding of a duty of care by a principal which had no control over the system of work or the worker’s duties.

Mark Lee suffered a back injury manoeuvring heavy boxes at the back of his semi trailer, while the trailer was being unloaded at a depot. Mr Lee was employed by a subcontractor to Wickham Freight Lines Pty Ltd, which had a contract with Woolworths Limited to transport goods to one of its Big W stores. It was not in dispute that the system of work which required Mr Lee to restack the heavy boxes was inadequate, but the trial judge found that Wickham was not responsible for the system of work and owed no duty of care to Mr Lee.

The Court unanimously upheld the trial judge’s decision and confirmed that the common law does not impose on a principal a duty of care with respect to the employees of its subcontractor, except in certain situations where:

the work is undertaken on the premises of the principal, the principal exercises a degree of control over or directs the manner of performance of the work undertaken, or the condition of the plant or premises is under the control of the principal
the work requires the principal to co-ordinate the activities of different contractors
the principal has, or ought to have, knowledge of the risk, and the subcontractor does not or could not have knowledge
the principal has the means to alleviate the risk, and the subcontractor could not reasonably be expected to do so.

Justice of Appeal Basten found that this was not a case where the principal exercised day-to-day control over the subcontractor or its employee. His Honour found that the accident did not arise due to the lack of co-ordination of the principal’s subcontractors. Also, the risk of injury, in this case, was one with which Mr Lee’s employer, being a trucking company, was well acquainted.

His Honour held that, in situations where the principal does not control the work environment, the fact that it knew of a particular situation involving an employee of a subcontractor is likely to be of little weight in creating a duty of care.

His Honour also found that while Wickham had ‘guidelines’ for the work undertaken by the subcontractor, Wickham had not accepted legal responsibility for the employees of its subcontractor.

This case reiterates a consistent line of authority emanating from the High Court that the common law does not impose a duty of care upon a principal to the employees of its subcontractors, with the exception of certain circumstances dependent on the principal’s degree of control over the system of work – even if the principal knew of the risk: Leighton Contractors Pty Ltd v Fox (2009) 240 CLR 1.

Lee v Wickham Freight Lines Pty Ltd [2016] NSWCA 209

Liability for a separate injury can be determined in section 61 proceedings

The District Court has considered on whether a worker may seek a determination of liability for a separate injury in the course of proceedings under section 61 of the Workers’ Compensation and Injury Management Act 1981 (WA) (Act).

Mr Walsh sustained injuries to his left arm on 24 March 2015 in the course of his employment with Fortescue Metals Group Limited (FMG). His workers’ compensation claim form described the injury as a strain to the left biceps, for which FMG’s insurer, GIO, accepted liability.

In June 2015 GIO issued the worker with a section 61 notice based on evidence from Dr White that he had recovered from the left bicep injury. Mr Walsh challenged the employer’s right to discontinue his weekly payments.

Mr Walsh contended at arbitration that the compensable injury was an injury to the left bicep and left shoulder, not just an injury to the bicep. It became clear that as well as challenging the section 61 notice he was seeking a determination of liability for the left shoulder injury.

Arbitrator Nunn determined that the section 61 proceedings were confined to the bicep injury, as that was the injury identified by Mr Walsh in his application and the supporting medical evidence and further was the injury for which GIO accepted liability and the injury identified in the section 61 notice. Arbitrator Nunn dismissed his application and ordered that the weekly payments be discontinued from 17 July 2015.

Mr Walsh appealed to the District Court on the basis that Arbitrator Nunn should have made findings as to whether he had also suffered a left shoulder injury.

District Court Judge Herron dismissed the appeal. His Honour referred to dicta of Rowland J in Heat Containment Industries v Kimberley (1990) 2 WAR 47, in particular, that section 61 applications are interim in nature and not intended to determine the final rights and entitlements of the parties. Judge Herron found that other provisions of the Act are applicable to a worker seeking a determination of liability and that a section 61 application is only concerned with liability to make ongoing weekly payments for incapacity in respect of an injury for which liability has been established. The purpose of section 61 is to determine whether an employer is entitled to reduce or discontinue weekly payments on the grounds set out in the section 61 notice.

Notably, His Honour went on to provide guidance as to how similar disputes might be determined in the future. Judge Herron considered that the arbitrator had ample power to determine liability for the left shoulder injury in the same hearing as the section 61 notice, as long as that issue was clearly particularised and was the subject of an application under an appropriate section of the Act, with both parties given the opportunity to adduce evidence and be heard in relation to that issue.

His Honour’s comments raise the spectre of workers incorporating questions of liability for separate injuries (or indeed other disputes) into section 61 proceedings and having the disputes heard together, provided that the other dispute is clearly defined and the subject of an appropriate application under the Act.

Walsh v Fortescue Metals Group Ltd [2016] WADC 140

No compensation for fair and just discipline

The District Court of WA has allowed an appeal from an employer against a finding that its discipline of a worker was unreasonable and harsh for the purposes of section 5 of the Workers’ Compensation and Injury Management Act 1981 (WA) (Act).

Catherine Kieronski claimed workers’ compensation due to a psychiatric injury that she allegedly contracted while working for Woodside. There was no dispute that the psychiatric injury wholly or predominantly arose from Woodside’s discipline of Ms Kieronski in relation to allegations of serious breaches of Woodside’s code of conduct. The issue was whether that discipline was unreasonable and harsh on part of Woodside, as if it was, Ms Keironski would be entitled to receive workers’ compensation benefits under the Act.

Ms Kieronski was alleged to have been involved in an inappropriate relationship, to have had irregularities in relation to her sick leave and to have misused her corporate credit card. A meeting was arranged, at which the allegations were put to Ms Kieronski. Ms Kieronski was also advised that an investigation would be undertaken in respect of the allegations. As a result, Ms Kieronski would be stood down with full pay and in the interim, her mobile phone and security pass were taken from her as per Woodside’s standard practice. Upon being requested to collect her belongings, Ms Kieronski was escorted to her desk and then escorted from the building to her home.

Ms Kieronski alleged that Woodside’s conduct with respect to her discipline was unreasonable and harsh. The arbitrator found in favour of Ms Kieronski and determined that Woodside’s conduct had been unreasonable and harsh. The arbitrator accepted that Woodside had required Ms Kieronski to attend a meeting at which she was ‘ambushed’, was given no prior notice of the meeting or of the allegations made against her, evidence supporting the allegations was not adequately disclosed and there was no opportunity to prepare or answer the allegations.

In particular, the arbitrator determined that only the events on the day of the meeting were relevant and that the surrounding events and circumstances were irrelevant. These events involved Ms Kieronski being provided with a letter briefly outlining the allegations prior to the meeting, the subsequent steps in the process that were foreshadowed at the meeting and the process that was in fact followed by Woodside.

Woodside sought leave to appeal the arbitrator’s decision. Counsel for Ms Kieronski argued that the arbitrator’s decision that Woodside’s conduct was unreasonable and harsh was a finding of fact reasonably open on the evidence and that accordingly, no appeal could lie from it. Senior Counsel for Woodside argued that although the arbitrator’s decision that Woodside’s conduct was unreasonable and harsh was a finding of fact, three of the four reasons for arriving at that decision were questions of law in which the arbitrator erred.

District Court Judge Parry confirmed the law that Woodside has a duty of procedural fairness and to afford natural justice to Ms Kieronski however found that the arbitrator’s determination that only the events on the day of the meeting were relevant was made erroneous, given the arbitrator did not consider the subsequent events and circumstances surrounding the discipline. In His Honour’s view, had these events been considered, the determination may have been different. His Honour also found that given Ms Kieronski understood the meeting to be merely a step in the investigative and disciplinary process, the events that followed were relevant to a determination of whether the discipline was unreasonable and harsh.

Given that the errors of law were material to the arbitrator’s decision (which was a question of fact), leave to appeal was granted and the matter was remitted to the Arbitration Service for determination in accordance with law by a different arbitrator.

The case confirms the long established principle that employers have a duty to afford procedural fairness and natural justice to a worker in its disciplinary action otherwise its conduct may be considered unreasonable and harsh. It also provides authority that the whole of the employer’s conduct should be considered in relation to the discipline and not one specific event when determining whether an employer’s conduct was unreasonable and harsh.

Woodside Energy Ltd v Kieronski [2016] WADC 144

Persistent litigant declared vexatious

In a recent win for the WA justice system, the Supreme Court has ordered that a vexatious litigant, Geoff Barkla, be barred from instituting proceedings without leave of the court, pursuant to the Vexatious Proceedings Restriction Act 2002 (WA).

Mr Barkla lodged a workers’ compensation claim against his former employer, G4S Custodial Services Pty Ltd (G4S), for psychological injuries sustained during the course of his employment as a custodial services officer on or around 13 October 2010. Three days after Mr Barkla lodged his claim, G4S’s insurer, Allianz, issued a Form 3C notice under section 57A(3)(c) of the Workers’ Compensation and Injury Management Act 1981 (WA) (Act), advising that it was not able to make a decision regarding liability of the weekly payments claimed within the requisite timeframe under the Act.

More than 10 days passed from the date of that notice and Mr Barkla’s claim was deemed to be disputed under section 57A(3)(a) of the Act. Mr Barkla then commenced proceedings for a determination of liability for his claim. Allianz opposed the application on the basis that it disputed liability for the claim. Mr Barkla filed an interlocutory application for commencement of weekly payments on the basis that Allianz had failed to comply with the notification provisions in section 57A(3) of the Act as it had failed to give him a From 3B notice that it disputed liability.

Registrar Melville dismissed Mr Barkla’s application, finding that as long as an insurer issues one of the three types of notices provided for by section 57A(3), the insurer will have complied with the legislative requirements. Where a claim is deemed to be disputed, it allows a worker to commence proceedings. It did not give rise to an entitlement to weekly payments under section 57A(5).

Allianz later accepted liability for the claim and commenced making weekly payments. Mr Barkla then discontinued his application for a determination of liability. Mr Barkla eventually exhausted his entitlements for weekly payments under the Act.

Notwithstanding this, however, Mr Barkla was dissatisfied with the Arbitrator’s decision in relation to the section 57A(3) as what then followed was an extraordinary amount of litigation, with Mr Barkla commencing or attempting to commence various actions and appeals in the District Court, Supreme Court, Court of Appeal and the High Court, seeking an answer to what he called the ‘Form 3B issue’. Mr Barkla named various defendants – including Allianz, G4S, Allianz’s lawyers, WorkCover, various WorkCover arbitrators, District Court judges, Supreme Court justices and registrars (25 cases/applications/appeals in total). Mr Barkla sent over 600 emails to the District Court Registry over a period of two years and even had his local member of parliament ask questions of the Minister for Commerce on his behalf at question time in parliament.

Mr Barkla pursued these suits even though Allianz had already commenced weekly payments which meant that his pursuit was ultimately futile.

Unsurprisingly, all of Mr Barkla’s suits were found to be attempts to aerate and re-agitate issues that had previously been litigated and decided upon. Mr Barkla had undisputedly wasted an enormous amount of court’s time and his claim was described by the courts as unsustainable, an abuse of process and frivolous and vexatious.

The line of Barkla cases serve as conclusive authority that there is no legislative requirement to issue a further notice once a Form 3C has been provided within the time frame required by the Act. A failure to do so will not result in a worker’s automatic entitlement to weekly payments.

Attorney General for Western Australia v Barkla [2016] WASC 298

General insurance

Owner/builder of property entitled to indemnity

The WA Court of Appeal has dismissed an appeal concerning a denial of policy indemnity in reliance upon an exclusion clause.

Mr Verini purchased land on 15 April 1993 and lodged an application for a building licence to construct a residential building on it. The plans included the construction of a timber balcony which was approved by the relevant council. Mr Verini engaged a carpenter in the construction of the balcony and relied on the carpenter’s expertise. He did not engage a structural engineer or any other person to supervise the building of the house. The balcony, as constructed, did not comply with the plans that were approved by the relevant council. Later Mr Verini transferred ownership of the property to another owner and the title was subsequently transferred on two further occasions.

On 31 October 2009, the balcony collapsed causing injury to 14 people who were standing on it who brought personal injury claims against Mr Verini. Mr Verini issued a third party notice against WFI Insurance Limited claiming an indemnity under his Liability Policy. WFI accepted that the accident fell within the scope of the Liability Policy but relied upon exclusion relating to a breach of Mr Verini’s duty as the owner or occupier of a building or structure that WFI Insurance did not insure .

The primary judge found that the policy responded because the claim was not in respect of the breach of his duty ‘as … owner’ within the meaning of the exclusion. Rather, duty arose out of building the house which was independent of ownership.

WFI’s substantive contention on appeal was that Mr Verini as owner in 1993/1994 of the house, owed and breached a duty of care to the plaintiffs. The appeal failed as the Court held that Mr Verini’s breach of his duty of care did not arise from his duty as the owner/occupier but from his duty as the person who undertook the responsibility of constructing the house on the property, being that of the builder. For these reasons, the Court dismissed WFI’s appeal and upheld the primary court’s decision that WFI had not established that the exclusion clause applied to exclude cover under the Liability Policy.

The argument to avoid indemnity under the liability policy ultimately failed as the relevant question was in what capacity did Mr Verini’s liability to the claimant arise – as an owner or as a builder? It was not enough to say that just because Mr Verini was also the owner, the exclusion policy would apply. The liability has to have arisen from a breach of Mr Verini’s duty as owner (and not as a builder) for WFI to be successful in its appeal.

WFI Insurance Limited v Verini [2016] WASCA 143

Is one not enough? ‘Other insurance’ clause not void under section 45

The NSW Court of Appeal has unanimously dismissed an appeal for declarations of indemnity arising from an insurance contract and purchase agreement in relation to an aircraft accident where two insurance policies may apply to cover the loss.

Lambert Leasing Inc. (Lambert) sold an aircraft and the purchasers then leased the aircraft to Lessbrook Pty Ltd. Under the aircraft sale agreement, the purchasers were required to procure aircraft liability insurance which indemnified Lambert in respect of claims resulting from the purchasers’ use or operation of the aircraft.

On 7 May 2005, the aircraft crashed during a flight from Barnaga to Cairns, killing all 13 passengers and the two pilots. Proceedings were brought in the United States by relatives of the deceased against Lambert.

Two insurance policies covered Lambert’s costs and liabilities in respect of the US proceedings. The first was a policy held by Lambert’s parent company (Saab Aircraft Leasing Inc.) with Global Aerospace Underwriting Managers Limited (Global). Lambert and Global discovered a second policy with QBE Insurance Ltd. Pursuant to the purchase agreement, Lessbrook procured an insurance policy with QBE which named Lambert as an ‘additional insured’.

Lambert sought indemnity under the Global Policy and was indemnified for the cost of the US proceedings. Lambert also sought indemnity under the QBE policy. In refusing to indemnify Lambert, QBE sought to rely on an ‘other insurance’ clause and invoked a co-operation clause to determine whether conditions precedent to cover had been met.

Lambert commenced proceedings in NSW seeking indemnity under the QBE policy. The primary judge accepted QBE’s contention that it was unable to determine whether the condition under the QBE policy had been met. However, the judge also determined in favour of Lambert and held that it was not reasonable for QBE to require the production of documents while Lambert was at risk of losing privilege over those documents.

The Court of Appeal held that the proceedings against QBE were premature as Lambert had failed to comply with its obligation to provide QBE with all information it required to determine whether conditions precedent to cover had been met.

Lambert submitted that section 45 of the Insurance Contracts Act 1984 (Cth) voided the ‘other insurance’ clause. The Court of Appeal applied the High Court’s decision in Zurich Australian Insurance Ltd v Metals & Minerals Insurance Pty Ltd (2009) 240 CLR 391; [2009] HCA 50 finding that, for section 45(1) of the ICA to apply, Lambert must have been a contracting party with the relevant insurer to have ‘entered into’ the policy.

The Court found that Lambert had not ‘entered into’ the QBE Policy because Lambert was named only as an ‘additional insured’ nor had it entered into the Global Policy, which had indemnified Lambert because it was a subsidiary of Saab. In addition, the Court considered that there was no evidence that Lambert was involved in negotiating terms of the contract or paid or contributed to the premiums for either policy.

As such, the ‘other insurance’ clauses cancelled each other out and Lambert was entitled to choose which insurer to seek indemnity from. As Lambert had already been indemnified by Global, it was not entitled to be indemnified by QBE.

This decision confirms that section 45 of the ICA only applies where the ‘insured’ is a party to both contracts of insurances. If the party is only a named insured, any provision in the contract of insurance attempting to limit or exclude liability will not be void.

Lambert Leasing Inc. v OBE Insurance (Australia) Ltd [2016] NSWCA 254

Fast Facts

Amendment to regulations in relation to workers residing outside of WA

Workers residing outside of WA are required to complete a ‘Form 6’ declaration every three months to continue to receive weekly payments of compensation.

From 17 October 2016, an amendment to the Workers’ Compensation and Injury Management Regulation 1982 (WA) will apply, amending the Form 6 declaration and providing clarification on the ‘intervals’ that a worker has to provide the Form 6.

The key changes are:

The medical practitioner will confirm the worker’s identity (by being photographic proof such as a passport, driver’s licence etc) when assessing the worker’s capacity for work.
The removal of the requirement for the worker’s and the medical practitioner’s medical signature to be witnessed by a person with authority to administer an oath.
Workers are to send the declaration at any time within three months after the date on which the worker is no longer residing in the State. The relevant date for compliance being when the declaration was sent (not received).
Workers are to send a declaration at any time within three months after the date of the previous declaration was sent by the worker (not the date it is received by the employer or its insurer).
The declaration can be sent electronically, by post or in person.

The amendments are not retrospective and apply from 17 October 2016.

Contents

Motor vehicle accidents

Failure to mitigate and exaggeration limits loss of earning capacity