Indemnity payments from labour-hire organisations to industry clients will be put under the spotlight as a result of a Queensland court ruling published this week.
Nick Byrne let’s say, was crushed by machinery during a construction project, sustaining major limb injuries. Byrne sued Thiess John Holland to whom he was deployed, as well as his actual employer, People Resourcing.
The claim before trial at $450k, with TJH and WorkCover Queensland agreeing they were equally liable. But only WorkCover (for PR) paid over its half share.
TJH demanded PR stump up its share and pay it to Byrne, relying on a stipulation in its secondment agreement that PR would indemnify for any on-the-job injury liability. PR in turn, went back to WCQ asking it also come to the party for what it had to pay over to TJH under its contract.
Not unexpectedly, WCQ refuted any such obligation under PR’s workers comp policy and asserted that PR or its employment risk insurer was solely responsible to meet any “private contractual arrangement” it had with TJH.
That’s because it argued, the indemnity obligation was a “self-imposed commitment” and a form of liability outside the scope of the Workers Compensation and Rehabilitation Act policy. It relied on a line of New South Wales decisions that supported the view that PR’s obligation was incurred “via debt rather than damages” and therefore not covered.
PR was able to point to a 1969 High Court ruling that “regardless of who paid the judgment or when, the non-employer co-tortfeasor’s right to recover the full amount of a verdict for common law damages against an insured employer and the obligation to pay it” constituted damages in respect of the worker’s injury and was “therefore covered by the Queensland scheme”.
To follow the New South Wales authorities would, it contended, “illegitimately introduce a form of de facto proportionate liability into workers compensation claims in Queensland”. The issue fell to be decided by Chief Justice Tim Carmody who noted at the outset that the defendants were jointly liable for the damages “in toto” meaning Byrne could recover the entire sum from either party, irrespective of agreed apportionment.
Chief Justice Carmody considered the Brisbane Stevedoring decision to be “binding authority for the proposition that a negligent employer in PR’s position incurs liability for the full amount of a judgement either by direct payment to the plaintiff or indirectly via reimbursement of an indemnified co-tortfeasor.”
There was in his view, “no textual or contextual support for the narrower WorkCover construction or any reason for supposing that WCRA imposes a deliberate limitation on the scope of the statutory policy to bypass Brisbane Stevedoring”.
WCQ was obliged to indemnify PR to the full extent of the judgement because PR had “become legally liable” to pay “damages” of $450k to the injured worker regardless that payment of half of that sum was by way of private arrangement between it and TJH.
Given the economic significance of the decision, one could expect an appeal.
It should also be noted that the employer’s policy may not respond in a similar way if the host is the only party sued by the injured worker.