QBE Insurance Limited v AMP Workers' Compensation Services

(a) was (with Mr Graupner) insured under the compulsory third party policy issued by QBE, and

(b) was (without Mr Graupner) doubly insured via the AMP workers' compensation policy. 6 The effect of the settlement of the litigation was that the employer MRT was relieved of its vicarious liability (to Mr Mitchell) for the action of Carl Graupner, the employee responsible for his negligent injury. That relief was by virtue of the settlement of that litigation. It matters not, on the Plaintiff's view, that the employee, Mr Mitchell, did not sue MRT; it could always have done so, instead or as well. Had it done so MRT would have been liable under principles of vicarious liability. Thus the effect of making the settlement payment (ex QBE's policy) to Mr Mitchell was to discharge that vicarious liability.

FACTUAL BACKGROUND 7 Set out below is an essentially agreed chronology of the relevant events. AGREED CHRONOLOGY [* Reference to affidavit is in each case to that of Joseph Hallion for Plaintiff dated 2 March 2000]

24/11/95 QBE issued CTP policy to Mudgee Refrigerated Transport (MRT) (Affidavit* para 3, "A")

9/9/96 Gregory Mitchell injured in motor vehicle accident: · Truck driven by Carl Graupner (fellow employee); · Truck owned by employer, Mudgee Refrigerated Transport. (Affidavit* 5-7)

21/12/96 AMP makes payments to Gregory Mitchell under workers' compensation insurance covering MRT. (Affidavit* 9)

15/1/97 Gregory Mitchell makes claim on CTP policy against QBE. ("B" to Affidavit*)

20/3/98 QBE requests contribution from AMP. ("E" to Affidavit*)

5/9/98 Gregory Mitchell commences proceedings against Carl Graupner and RTA. (Affidavit* 10, "C")

16/7/99 QBE requests contribution from AMP. ("F" to Affidavit*)

15/9/99 AMP does not concede dual insurance applies. ("G" to Affidavit*)

24/11/99 QBE settles proceedings for $450,000 inclusive of costs. (Affidavit* 13, "D")

20/1/00 QBE pays settlement monies to Gregory Mitchell. (Affidavit* 23, "H")

8 Essentially then what happened was that in 1996 a worker employed by MRT, Mr Mitchell was injured at work when a fellow employer, Mr Graupner, drove the insured truck which was owned by MRT off the road. 9 MRT was insured:

(a) for compulsory third party insurance ("CTP") by QBE; and

(b) for workers' compensation and common law liability by AMP. 10 Mr Mitchell received payments from AMP under the workers' compensation policy. 11 Mr Mitchell also made a claim against Mr Graupner for negligence but, as it happens, not joining MRT as a party. Mr Mitchell received $450,000 in settlement of the proceedings. The settlement monies were paid by QBE pursuant to the CTP policy. Part of the settlement monies were paid to AMP in reimbursement of the workers' compensation payments thus leaving the issue that AMP was required to reimburse 50% of the $450,000 paid out by QBE. 12 A short description of the policies, again not controversial, is set out below, taken from the Defendant's submissions:

" The Policies The provisions of QBE's CTP were those prescribed by Motor Accidents Act 1988 (NSW). Schedule 1 of that Act provides: "The insurer insures the owner of the motor vehicle and any other person who at any time drives the vehicle (whether or not with the consent of the owner) against liability in respect of the death of or injury to a person caused by the fault of the owner or driver of the vehicle … in the use or operation of the vehicle in any part of the Commonwealth …"

This makes clear the coverage is of both owner (MRT) and driver (Mr Graupner).

Section 16(a) of the Motor Accidents Act 1988 (NSW) also provides: "A third-party policy shall not extend to insure the owner or driver of a motor vehicle against a liability to pay compensation under the Workers Compensation Acts (or any corresponding law of another State or a Territory of the Commonwealth) to a worker employed by the owner or driver … "

In addition the Employees Liability Act 1991 (NSW) in s3(1)(b) sets out the circumstance in which the insured employee is entitled to indemnity from the employer who is vicariously liable. It provides: "If an employee commits a tort for which his or her employer is also liable … the employer is liable to indemnify the employee in respect of liability incurred by the employee for the tort ( unless the employee is otherwise entitled to an indemnity in respect of that liability )."

Importantly, that precludes liability on MRT's part to indemnify Mr Graupner. But it does not remove MRT's vicarious liability to Mr Mitchell for the negligence of Mr Graupner.

The provisions of AMP's workers compensation policy were those prescribed by Workers Compensation (General) Regulation 1995. Schedule 1, Form 4 of that regulation provided that the Employer would be covered in the following circumstances: " Part 2 Cover provided by Policy

3. What the Insurer is liable for The Insurer will indemnify the Employer against all of the following sums for which the Employer becomes liable during or in respect of the period of insurance: (a) compensation that the Employer becomes liable to pay under the Act to or in respect of any person who is a worker of the Employer (including any person to whom the Employer is liable under section 20 of the Act), (b) any other amount that the employer becomes liable to pay independently of the Act … for any injury to any such person … , (c) costs and expenses incurred with the written consent of the Insurer in connection with the defence of any legal proceeding in which any such liability is alleged."

RELEVANT PRINCIPLES 13 The relevant principle is that double insurance exists where, at the time of the loss, two legally enforceable policies cover the same interest in the same subject matter against the same risk, in the sense that the subject matter in respect of which the claim is made must be common to both policies even if they cover other risks as well. It is not however necessary that the insurances should be identical. As was put by the majority judgment in Albion Insurance Co v Government Insurance Office (NSW) (1969) 131 CLR 342 at 346 per Barwick CJ, McTiernan and Menzies JJ: "The essential element for contribution is that, whatever else may be covered by either of the policies, each must cover the risk which has given rise to the claim. There is no double insurance unless each insurer is liable under his policy to indemnify the insured in whole or in part against the happening which has given rise to the insured's loss or liability ." [emphasis added]

14 As Priestley JA explained in Australian Eagle Insurance Co Ltd v Mutual Acceptance (insurance) Pty Ltd [1983] 3 NSWLR 59 at 64: "… a sound way of deciding whether one insurer can claim contribution from another on the ground of double insurance is to ask two questions: (1) Did the two insurers have a common burden? (2) If the insured were to be paid under both policies he would be paid twice in respect of the same damage?"

Double insurance in the present case? 15 For contribution arising from double insurance, there are really two connected conditions to be satisfied. The first is that the insured must have two insurers. The second is that those two insurers must each "cover" the risk which has given rise to the claim, so as to be liable under the policy to indemnify the insured in whole or in part against the relevant happening. Clearly enough, the only insured capable of satisfying the first condition is MRT the employer. Neither Mr Mitchell nor Mr Graupner had double insurance as I explain. 16 It is true Mr Mitchell ultimately received two lots of payment. But neither were sourced to policies covering Mr Mitchell. The QBE payment was from QBE's coverage not of Mr Mitchell himself but of Mr Graupner and MRT. The AMP's payments were from coverage by AMP of MRT, indemnifying MRT (not Mr Mitchell) for workers' compensation payments. 17 Now consider Mr Graupner. On no view does he have double insurance. While he is jointly covered by the QBE policy, he is not covered at all by the AMP policy. Nor does payment under the AMP policy relieve him of any liability. 18 But does MRT satisfy the two conditions? Clearly enough it has two insurers. But do they cover a common risk, falling on MRT and giving rise to liability to indemnify MRT on the part of both insurers? Thus QBE, covers MRT for its vicarious liability for the negligent action of its employee Mr Graupner. But is the common burden removed from QBE in respect of MRT because:

(a) MRT was never joined in Mr Mitchell's legal action against Mr Graupner,

(b) payment by QBE was made direct to Mr Mitchell in settlement of a claim made solely against Mr Graupner, and

(c) MRT was relieved from liability to indemnify Mr Graupner because Mr Graupner was entitled to an indemnity in respect of that liability, by virtue of s3(1)(b) of the Employees Liability Act 1991. 19 The short answer is that the vicarious liability owed to Mr Mitchell fell upon MRT from the moment of Mr Graupner's negligent injury as driver to Mr Mitchell, MRT's employee and was discharged only upon payment direct to Mr Mitchell. Meantime MRT was covered by the QBE policy. That Mr Mitchell chose, as against MRT and Mr Graupner, to proceed only against Mr Graupner does not alter the fact that MRT's vicarious liability continued unabated. It was only discharged upon QBE's payment direct to Mr Mitchell, in settlement of Mr Mitchell's claim. There was never any earlier release of MRT from its vicarious liability, nor earlier consequential relief of QBE's insurance burden vis a vis MRT. Suing Mr Graupner alone effected neither release nor relief, as at any time MRT could have been joined in the Mr Mitchell action. Only that settlement payment by QBE ipso facto removed QBE's burden vis a vis MRT, just as it removed QBE's burden vis a vis Mr Graupner. That the policy covered both Mr Graupner and MRT for what was a joint and several liability did not mean that it failed to cover MRT's risk. Nor that the joint risk so covered should be differentiated from MRT's sole risk for Workers' Compensation payments. Precisely the same result occurred in State Government Insurance Commission (SA) v Switzerland Insurance Australia Limited (1995) 22 MVR 10 where the South Australian full court, following Commercial and General Insurance Co Ltd v GIO (NSW) (1973) 129 CLR 374 declined to descend into any detailed working out of the rights of insurers and third parties in treating the risk insured as essentially the same, as between the two insurers. 20 Thus it follows that QBE covered the risk throughout for which it was liable to indemnify MRT. It also follows that QBE discharged that burden by direct payment to Mr Mitchell. That payment was not only in settlement of Mr Mitchell's actual claim he chose to pursue against Mr Graupner but ipso facto discharged any claim Mr Mitchell retained against MRT, being a claim which he never formally abandoned. 21 Nor have I any basis for concluding such a claim against MRT was waived, merely from the fact that the action was brought only against Mr Graupner. No argument was put to that effect. Thus, as MRT's vicarious liability did not depend on the bringing of proceedings against it, what was said in Commercial & General Insurance Co Ltd v Government Insurance Office of NSW (supra) at 384 (Menzies, Walsh and Mason JJ) is not to the point here: "In the working out of rights and liabilities of insurers among themselves, it ought not to be assumed that there will be independent proceedings by some person not subject to the control of the insurer interested in the taking of such proceedings."

22 Nor does s3(1)(b) of the Employee's Liability Act 1991 have any present bearing. The relevant "burden" of QBE was not to indemnify MRT against any claim by Mr Graupner, but to indemnify MRT for its vicarious liability to Mr Mitchell on account of Mr Graupner's negligence. 23 Once it be established that QBE had a relevant insurance burden vis a vis MRT in relation to Mr Mitchell, it follows on well established principles that AMP had an equivalent burden, though not precisely the same, for MRT's liability for workers' Compensation payments to Mr Mitchell arising out of the same incident. AMP is obliged to indemnify MRT for its liability for workers' compensation payments to Mr Mitchell. Those principles were restated recently by Heerey J in Burke v LFOT Pty Limited ([2000] FCA 1155, 18 August 2000, unreported). I adopt the convenient summary of what Heerey J said from R I Barrett's note of the case in [2000] 74 ALJ 47-8: "First, to give rise to contribution, the liabilities in question need not have arisen from the same instrument or at the same time, or with knowledge on the part of each putative contributor of the other's liability: Street v Retravision (NSW) Pty Ltd (1995) 56 FCR 588. Secondly, it does not matter that the liabilities arose from different causes of action: BP Petroleum Development Ltd v Esso Petroleum Ltd [1987] SLT 545 (itself a case of concurrent liability in tort and by statute). Thirdly, a critical element of liability for contribution between two parties is that payment by one is for the benefit of both: Albion Insurance Co Ltd v Government Insurance Office of NSW (1969) 121 CLR 342."

Lehane J added, relevantly to the present circumstances: "'the parties may be subject to a common burden although the source of the obligation of one is of a different kind than that of the obligation of the other.'

Lehane J saw the principle in Albion Insurance as requiring only: 'that two or more persons are each liable in respect of the same debt or the same loss sustained by a third party, in circumstances where discharge of the obligations by one relieves the other(s). The object is to ensure that equity as between persons liable in those circumstances is not defeated by the caprice of the person entitled to the benefit of the obligation.'"

CONCLUSION AND ORDERS 24 I am satisfied that the Plaintiff QBE succeeds in seeking contribution from the Defendant AMP and is entitled to a rateable contribution accordingly. Costs ordinarily should follow the event, though the parties may address me on costs if they wish. I direct the parties to submit orders giving effect to this judgment as soon as possible.

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