The obligation to insure against common law liability under the Workers Compensation Act 1987 (NSW) (the WCA) is a subsidiary obligation and relates only to an injury to a worker in respect of which the employer is subject to a primary obligation to insure against workers compensation liability.
The plaintiff suffered injuries in the course of his employment with the defendant on 17 September 2002 in Mitchell, located in the Australian Capital Territory (ACT). The plaintiff’s injuries were found to have occurred due to the negligence of the defendant.
Each day, the plaintiff would drive the ‘Yass truck’ from his house in New South Wales (NSW) to Mitchell, and then use it make deliveries, including to the defendant’s store in Yass, NSW. The plaintiff usually carried out his duties in both NSW and in the ACT. The plaintiff’s base was found to be in Mitchell for the purposes of his employment.
The plaintiff sought damages from the defendant. The defendant had policies of workers compensation insurance in both NSW and the ACT. The NSW insurer and the ACT insurer each claimed that the defendant should be indemnified in the proceedings commenced by the plaintiff under the policy issued by the other insurer. As a result, the defendant joined both the NSW insurer and the ACT insurer to the proceedings as third parties.
At first instance, the Supreme Court found that the ACT insurer was liable to indemnify the defendant for the damages awarded to the plaintiff. However, the Supreme Court held that the defendant was also entitled to be indemnified by the NSW insurer pursuant to the principles of dual insurance.2
The NSW insurer appealed the orders made at first instance, so far as they concerned it.
The Court of Appeal considered that the main issue was the operation of s 155 of the WCA, and of the insurance policy whose terms were specified in the relevant regulation as a policy giving effect to the obligations imposed by s 155.
The terms of the prescribed policy are now set out in regulation 51 of the Workers Compensation (General) Regulation 2016 (NSW), however, they are identical to the terms of the prescribed policy that were applicable at the time of the plaintiff’s accident.
The Court of Appeal concluded that s 155 created only an obligation on employers whose workers may have entitlements under the WCA to insure against:
- Any liability under the WCA to any of their workers
- Any liability at common law for any injury to any of their workers, being an injury in respect of which a liability under the WCA arises.
The Court of Appeal reviewed the Reading Speech given at the time s 155 was amended in 1995 and concluded that the Attorney General’s comments did not suggest any intention that s 155 should operate to render an employer liable to hold a NSW insurance policy that extends cover to common law liabilities owed to insured workers where the common law liabilities arise from injuries suffered in circumstances in which there would be no workers compensation liability under the WCA.
Accepting that the defendant was not liable for the plaintiff’s injury under the WCA on the construction of s 155, the Court of Appeal felt that it should adopt the defendant’s NSW insurance and that it did not apply to any workers compensation liability for that injury. Therefore it also did not apply to any common law liability in respect of that injury.
At the time of the plaintiff’s accident the applicability of the WCA to injuries received outside NSW was governed by s 13, which has now been repealed and replaced by s 9AA which covers employment that is connected with the state. The Court of Appeal held that s 13 was relevant to interpreting s 155 in that the extended operation of the WCA effected by s 13(1) flowed through to the requirement in s 155 for an employer to insure against liabilities arising by operation of s 13(1).
By the same process of reasoning, s 9AA would now extend a requirement in s 155 for an employer to insure against a liability arising in respect of injuries covered by that section, that is, employment that is connected with this state. The Court of Appeal noted that in fact such has already occurred. 3
The Court of Appeal concluded that the Master of the Supreme Court at first instance was in error in that he treated the insurance that the defendant obtained from the NSW insurer as if it also insured the defendant against common law liability for any injury to the plaintiff that did not give rise to any workers compensation liability under the WCA.
Where common law proceedings are brought in respect of an injury occurring outside of NSW, NSW case managers need to consider whether there is a liability to pay workers compensation under the WCA. If there is no such workers compensation liability, there is also no liability to indemnify the insured in respect of the common law claim brought in respect of that out of state accident.
The facts in this case are relatively commonplace in that cross-border issues often occur, in particular between NSW and ACT. If the accident does not satisfy the s 9AA test in respect of workers compensation liability, case managers should consider declining indemnity regarding common law claims commenced in respect of out of state accidents. That should be the case, irrespective of whether those claims are commenced in NSW or in the state or territory in which the accident occurred.
1 Refshauge ACJ, Penfold and Burns JJ.
2 Master Harper in Shephard v FAW Industries Pty Limited  ACTSC 20.
3 RHG Home Loans Pty Limited v Employers Mutual NSW Limited  QSC 28.