Contribution
8The circumstances in which contribution on the basis of double insurance can be claimed was summarised by Giles JA in Zurich Australian Insurance v GIO General Limited [2011] NSWCA 47 ("Zurich v GIO") at [19]:
Contribution on the basis of double insurance may be claimed when an insured is entitled to indemnity from two different insurers in respect of the same liability. Payment by one insurer benefits the other, and the burden must be shared pro rata.
9 Mr Watson set out eight factual matters relevant to the determination in this case:
(1)Mr Y Chen ("Mr Chen"), a tour guide, was injured in a motor accident on 5 September 2005.
(2)The vehicle in which he was a passenger was owned by R&S.
(3)The accident was caused by the negligence of the driver of the vehicle.
(4)At the time of the accident Mr Chen was employed by Aimee.
(5)At the time of the accident the driver was employed by Aimee.
(6)Mr Chen could have brought proceedings against:
(a)R&S as owner of the vehicle.
(b)Aimee as employer of the driver for whose negligence Aimee was vicariously liable.
(c)The driver.
(d)R&S, Aimee and the driver.
but claimed only against R&S.
(7)Zurich insured R&S and the driver under a statutory third party policy.
(8)Zurich having admitted liability to Mr Chen and following an assessment by a MACA Assessor was held liable to pay $1.7M in damages and costs to Mr Chen (of which $650K would, but for these proceedings, be payable to GIO and the balance to Mr Chen).
10Mr Darke does not dispute any of the facts in [9] but he does emphasise as critical to the outcome of the case that:
(1)Whilst Zurich insured R&S and the driver under the compulsory third party policy it did not insure Aimee and,
(2)Whilst GIO insured Aimee under the workers compensation policy it did not insure R&S or the driver.
11The wording of the compulsory third party policy (found in s 10 of the MACA as it was at the relevant time) is as follows:
...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:
(a) if the motor vehicle is not one to which paragraph (b) applies-in the use or operation of the vehicle in any part of the Commonwealth (whether or not on a road), or
(b) if the motor vehicle is subject to an unregistered vehicle permit under the Road Transport (Vehicle Registration) Act 1997 -in the use or operation of the vehicle on any road in any part of the Commonwealth.
In this policy, words and expressions have the same meanings as in the Motor Accidents Compensation Act 1999 .
12The statutory form of the Workers Compensation Policy under the Workers Compensation Regulation 2003 (NSW) (as they were on 5 September 2005) included in addition to insurance for amounts payable under WAC:
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:
...
(b) any other amount that the Employer becomes liable to pay independently of the Act (but not including a liability for compensation in the nature of workers compensation arising under any Act or other law of another State, a Territory or the Commonwealth or a liability arising under the law of another country) for any injury to any such person (not including liability in respect of an injury, suffered by a person other than such a worker, arising out of any rescue or attempted rescue)
13Thus an employer's common law liability, such as its vicarious liability for negligent acts of an employee causing injury to a third party is insured under the GIO policy.
14Zurich claims that the present case is one which falls within the ambit of AMP Workers Compensation Services (NSW) Limited v QBE Insurance Limited (2001) 53 NSWLR 35 as followed and explained in Zurich v GIO. GIO contends that this case does not fall within AMP v QBE or Zurich v GIO. Zurich, in the alternative, submits that if the case does not fall within AMP v QBE or Zurich v GIO this Court should expand the operation of "the extended principle" laid down in AMP v QBE. GIO resists any such expansion of AMP v QBE and submits that what is proposed by Zurich is inconsistent with Albion Insurance Co Limited v Government Insurance Office of NSW (1969) 121 CLR 342 on which AMP v QBE was itself based.
15In AMP v QBE an employee of a company was injured whilst a passenger in a truck negligently driven by another employee of the same company. The passenger sued the driver (and the Roads and Traffic Authority) and the proceedings were settled with judgment entered for the passenger against the driver. QBE insured both the truck and the driver under a third party motor vehicle policy and it satisfied the judgment debt and then claimed contribution from AMP, the workers compensation insurer of the employer. The driver, whilst insured under the QBE policy, was not insured under the AMP policy. AMP contended that it was never liable to indemnify the driver, that the employer was never sued when judgment was entered against the driver any liability the employer might have had to the passenger as vicariously liable for the driver's negligence ceased to exist. The Court of Appeal Handley JA (Mason P and Beazley JA (as her Honour then was) concurring) held that the question of double insurance had to be determined at the date of the accident or "casualty" and not when the claim for contribution was made. The Court noted that at the time of the accident both the driver and his employer were liable to the passenger and that the employer, if it had been sued, would have had a right to indemnity under both the QBE policy and AMP policy. AMP was therefore liable to contribute to the judgment sum, since payment by QBE to the claimant passenger relieved it of the obligation to pay a claim by the employer under its policy.
16In AMP v QBE Handley JA noted that in cases such as Albion the insured had chosen to claim against one insurer and by that choice had exonerated the other insurer from an equally legitimate claim for indemnity. The Court held that the principle outlined in Albion should be extended to a situation where it is the claimant who has chosen to sue one of two persons liable and the second person liable was someone who, if sued, would have been entitled to indemnity from both insurers. The claimant's "choice" was described by Handley JA as "a second layer of choice".
17In Zurich v GIO there were two possible owners of the vehicle which Zurich insured. One was Caringbah Bus Service Pty Ltd "Carringbah" and one was Tiger Tours (Management) Pty Ltd "Tiger". GIO insured Tiger but not Caringbah. The driver employed by Tiger was injured by his use of the trailer hatch door, which he claimed was poorly designed. He did not sue Tiger but sued Caringbah as owner of the bus and trailer. Caringbah admitted liability to the driver and judgment was entered against Caringbah. Zurich relied on AMP v QBE in its claim against GIO but the trial judge held that since it had not been found that Tiger was liable to the driver (because Tiger had not been sued) there was no crystallisation of liability in Tiger and hence no entitlement to indemnity under the Zurich policy so that the extended principle as laid down in AMP v QBE did not apply.
18On the appeal both GIO and Zurich submitted that Tiger was the owner of the bus (see [2] per Allsop P). Giles JA (with whom Young JA concurred at [82]) considered that the case fell within "the extension of the contribution principle in the AMP case". As Allsop P pointed out in his short judgment, concurring with the conclusion reached by Giles JA, since Zurich insured Tiger for the bus (and trailer) and GIO insured Tiger for its liability as employer the case was a clear case of dual insurance whereby payment by Zurich of Tiger's liability to the driver relieved GIO of its liability as employer of the driver.
19Giles JA noted the two responses of GIO by which it contended that the case did not fall within the contribution principle as extended in AMP v QBE and observed that there was a "Protean" quality to GIO's responses and that they were, in an important respect, contradictory to each other: [48] - [52]. The GIO responses which his Honour discerned were that Zurich should not have paid out on a claim against Caringbah because Tiger and not Caringbah was the owner of the vehicle. The second "response" was that:
(1)Tiger's liability was not a vicarious liability for an employee's negligence as in AMP v QBE but rather a liability based on Tiger's own fault in permitting its employee to work in an unsafe environment and
(2)that Tiger's liability as employer had not been established in the District Court proceedings to which it was not a party.
The Court rejected the first response and both limbs of the second response. None of those matters are pertinent here but in the course of dealing with the first response Giles JA said at [55]:
Zurich was inclined to agree on appeal that Caringbah and Tiger could not both have been owners of the coach. It is not necessary to decide whether or not that is so, or whether Tiger rather than Caringbah was owner of the coach.
20Mr Watson submitted that in [55] of the judgment, Giles JA in saying that it was not necessary to decide whether Tiger and Caringbah could have both been the owners of the coach at the same time, was indicating that a very wide approach to the extended principle laid down in AMP v QBE should be taken. Mr Darke pointed out that what was said at [55] was said in the context of an argument by GIO that Caringbah was not liable and hence that Zurich should never have accepted an obligation to indemnify Caringbah.
21GIO was, in Zurich v GIO, contending that Tiger, and not Caringbah, was the real owner of the coach and his Honour was dealing with GIO's attempt to rely on Caringbah having admitted liability which admission GIO had encouraged Carringbah to make. GIO might have asserted that since Caringbah has been found to be liable as owner but had no workers compensation insurance and Tiger was liable as employer because it was aware of the defects in the coach there was no double insurance. From Giles JA's description of the contentions (see [48] - [52] of Zurich) no argument of the kind put in the present case was put to the Court of Appeal. I agree with Mr Darke that Mr Watson's argument places too much weight on [55] even without regard to what was said by Allsop P. When regard is had to the President's judgment it is clear that the Court accepted that Tiger was in fact the owner of the bus since both sides so contended.
22I accept Mr Darke's central point which is that for the extended principle, as laid down in AMP v QBE, to apply there must, as a starting point, be double insurance. That is there must be two insurers of the one person, or to put it in reverse, there must be at least one potential defendant liable to the claimant who, if sued, could make a claim on either policy. In this case there is no "insured" who could make a claim against both Zurich and GIO if sued by Mr Chen. R&S and the driver could not claim on the GIO policy and Aimee could not claim under the Zurich policy. The choice made by Mr Chen to claim against R&S did not relieve GIO of any liability to indemnify R&S, so there was no "second layer of choice". That there must be "common insured" is made clear in the summary of principles for contribution in QBE Insurance (Australia) Ltd v Lumley General Insurance Ltd (2009) 24 VR 326 at [70] that for contribution to apply "both insurers must insure a common insured".
23It seems to me that Zurich's argument involves an unwarranted extension of AMP v QBE. Zurich's argument would extend to require a conclusion of double insurance in the following hypothetical situation:
(1)A sues X, an engineer, for negligent design of reinforcement in a building.
(2)A could have sued Y, a builder, for failure to meet specifications in connection with the same reinforcement.
(3)Both negligent design and negligent construction are responsible for failure of the wall.
24I do not think that in the example given above there could be said to be double insurance enabling X's insurer to claim contribution from Y's insurer because although A did not sue Y he could have done so. I do not think that there is double insurance in the present case either.
25Mr Watson relied on what was said by McHugh in Burke v LFOT Pty Limited (2002) 209 CLR 282:
[41] In addition to sureties, other relationships have traditionally been regarded as capable of giving rise to an order for contribution. They include co-insurers under contracts of indemnity insurance, co-contractors, parties liable to the holder of a bill of exchange, partners, joint tenants and tenants in common. More often than not, the relationships between the parties in those cases exhibit the characteristics commonly regarded as essential to establishing an entitlement to contribution, namely "a common interest and a common burthen". The nature of the relevant interest and burden is such that the discharge of the burden by one party constitutes a benefit to the other or others which, in fairness, the law cannot countenance them keeping. In Albion, for example, the right of contribution was attracted in the case of two insurers because both insurance policies covered the risk that gave rise to the claim. Kitto J said:
"What attracts the right of contribution between insurers ... is not any similarity between the relevant insurance contracts as regards their general nature or purpose or the extent of the rights and obligations they create, but is simply the fact that each contract is a contract of indemnity and covers the identical loss that the identical insured has sustained". (emphasis added)
Because payment by one insurer effectively discharged the other's liability to pay the claim, the insurer who had paid was entitled to contribution from the insurer who had not.
He contended, as I understand it, that it is sufficient if there is a policy with insurer A taken out by X and a second policy taken out by Y with insurer B both covering liability of the respective insureds to the third party. I do not read McHugh J as purporting to remove the requirement for contribution laid down by Albion of a common insured. The reference to "identical insured" as well as "identical loss" in the passage at [41] of LFOT which I have set out above reinforces that view. Regard should also be had to his Honour's comment at [44] that contribution will not apply "merely because the claimant's payment has benefited or relieved the other party financially" (cited in Zurich v GIO at [76] and see also Friend v Brooker (2009) 239 CLR 129 at [39] and [48] in which "common burden" is emphasised).
26In my view, it is not open to this Court to extend the principle of contribution to a situation where these is no common obligation owed by two insurers to a single insured. Zurich v GIO, QBE v Lumley and the other cases mentioned including Workcover Queensland v Suncorp Metway Insurance Ltd (2005) 43 MVR 363; Allianz Australia Workers Compensation (NSW) Ltd v NRMA Insurance [2007] ACTSC 2; Allianz Australia Workers Compensation (NSW) Ltd v NRMA Insurance [2008] ACTCA 10; Mercantile Mutual Insurance (Australia) Ltd v QBE Workers' Compensation (NSW) Limited [2004] NSWCA 409; 61 NSWLR 655 do not provide any support for such an approach.
27Mr Watson advanced a further argument on contribution making reference to ss 3 and 6 of the Employees Liability Act 1991 (NSW) which are in the following terms:
3 Employee not liable where employer also liable
(1) If an employee commits a tort for which his or her employer is also liable:
(a) the employee is not liable to indemnify, or to pay any contribution to, the employer in respect of the liability incurred by the employer, and
(b) 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).
(2) Contribution under this section includes contribution as joint tortfeasor or otherwise.
6 Employer subrogated to rights of employee under insurance policy
(1) If:
(a) an employer is proceeded against for the tort of his or her employee, and
(b) the employee is entitled under a policy of insurance to be indemnified in respect of liability that the employee may incur in respect of that tort,
the employer is subrogated to the rights of the employee under that policy in respect of the liability incurred by the employer arising from the commission of the tort.
(2) In this section, insurance includes indemnity.
28He contended that had the driver, been sued and been required to pay the judgment sum, would have had a right to be indemnified by his employer Aimee. Aimee would then be able to claim on its policy with GIO.
29Mr Darke's response was that s 3 and s 6 did not assist Zurich because the effect of s 3 was not to make Aimee an insured of Zurich and the effect of s 6 was to permit Aimee to be subrogated to the driver's cover if it had met the driver's liability to a third party, an event occurring well after the casualty itself and hence outside the scope of AMP v QBE.
30I agree that s 3 does not make Aimee an insured of Zurich. It could be said that by virtue of s 3 at the moment of the accident Aimee was liable to Mr Chen for the driver's negligence but that liability is not in dispute in this case - what is in dispute is whether any party who was not sued (Aimee or the driver) was insured by both Zurich and GIO at the time of the accident and the answer to that is that there was not.