A recent Qld Supreme Court decision* has paved the way for employers to require WorkCover Qld to indemnify them against contractual liabilities to third parties in relation to injuries to their workers.

It is often the case in personal injury claims that a third party defendant (such as a principal or host employer) has a contractual claim for indemnity against the employer for the worker’s injury. This is particularly common in the transport sector where contracts (such as labour hire agreements and charterparties) are often agreed on ‘knock for knock’ terms with each party assuming responsibility for injuries to their own employees even where the other party may have been at fault.

WorkCover Qld has historically refused to indemnify an employer under its workers’ compensation policy for any contractual liability (such as an indemnity) which the employer has assumed towards another party where the contractual liability exceeds the employer’s common law liability. WorkCover Qld has traditionally viewed any additional contractual liability assumed by an employer as self imposed. This often leaves the employer uninsured for the amount of the contractual liability unless they have separate insurance covering such liabilities.

In Byrne v People Resourcing (Qld) Pty Ltd & Anor, a labour hire worker was injured while working for a principal contractor who the worker’s employer (a labour hire company) had agreed to indemnify under a contract. The employer and the contractor agreed they were equally negligent for the worker’s injury and the claim was settled (by way of a consent judgment) on this basis. The contractor then sought to recover its share of liability from the employer pursuant to the contractual indemnity and, in turn, the employer sought indemnity for this share under its workers’ compensation insurance with WorkCover Qld.

The Court, citing a High Court decision, held that a negligent employer incurs liability for the full amount of a judgment either by direct payment to the injured worker or indirectly via reimbursement of an indemnified co-tortfeasor. As such, the Court determined the employer was legally liable to pay the full amount of the judgment and the amount payable under the contractual indemnity was a legal liability of the employer. WorkCover Qld was therefore obliged to indemnify the employer for the contractual claim.

As it currently stands, the decision will benefit third party defendants who have contractual indemnities from employers as it means the employer will be insured for the liability and the third party will not need to rely on the employer maintaining separate insurance for the contractual liability or, if not insured, having sufficient assets to meet the liability.

The decision will no doubt expose WorkCover Qld to larger claims, and they will likely appeal the decision or lobby for an amendment to its legislation.

*Byrne v People Resourcing (Qld) Pty Ltd & Anor [2014] QSC 269

This information is intended to provide a general summary only and should not be relied on as a substitute for legal advice.

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