Zurich Australian Insurance Ltd v GIO General Ltd [2010] NSWSC 85 | Case summary

2009/00289682 ZURICH AUSTRALIAN INSURANCE LTD v GIO GENERAL LTD JUDGMENT 1 The question for determination in these proceedings is a question of equitable contribution between two insurers arising out of an incident on 13 October 2002 in which Mr Ian McLellan was injured. 2 The plaintiff ("Zurich") was, at the time, bound by a third-party policy under the Motor Accidents Compensation Act 1999 in respect of a motor coach or bus registered number MO7411. The defendant ("GIO") was, at the time, bound by a policy of workers compensation insurance in respect of all workers employed by Tiger Tours (Management) Pty Ltd ("Tiger Tours"). 3 The principal relief Zurich seeks is declaratory relief. It claims declarations as follows: "1. A Declaration that the principles of double insurance apply as between the Plaintiff and the Defendant, in connection with the liability of each of them, arising from an incident which befell the late Ian McLellan on 13 October 2002. 2. A Declaration that the Plaintiff is entitled to equitable or other contribution from the Defendant pursuant to the principles of double insurance, in respect of damages and costs awarded to the late Ian McLellan against Caringbah Bus Service Pty Ltd in District Court proceedings no. 5584 of 2005." 4 By "principles of double insurance", Zurich no doubt intends to refer to a principle (now recognised as wholly equitable) imported from marine insurance and described as follows by the Lord Ordinary (Low) in the Scottish case of Sickness and Accident Assurance Association Ltd v General Accident Assurance Corporation Ltd (1892) 19 SC 977n at 980n: "In marine insurance a rule which has long been recognised is that when the assured has recovered to the full extent of his loss under one policy, the insurer under that policy can recover from other underwriters who have insured the same interest against the same risks a rateable sum by way of contribution. The foundation of the rule is that a contract of marine insurance is one of indemnity, and that the insured, whatever the amount of his insurance or the number of indemnities with whom he has contracted, can never recover more than is required to indemnify him. The different policies being all with the same person and against the same risk are therefore regarded as truly one insurance, and if one of the underwriters is compelled to meet the whole claim, he is entitled to claim contribution from the other underwriters, just as a surety or cautioner who pays the whole debt is entitled to rateable relief against his co-sureties or co-cautioners. There is no reason in principle in my opinion why the same rule should not be applied to other classes of insurance which are also contracts of indemnity, and this has been recognised by high authority in cases of fire insurance - North British and Mercantile Insurance Company v London, Liverpool, and Globe Insurance Company 5 Ch Div p 569." 5 The matter was put thus by Barwick CJ, McTiernan J and Menzies J in Albion Insurance Co Ltd v Government Insurance Office of New South Wales [1969] HCA 55; (1969) 121 CLR 342 at 345: "There is double insurance when an assured is insured against the same risk with two independent insurers. To insure double is lawful but the assured cannot recover more than the loss suffered and for which there is indemnity under each of the policies. The insured may claim indemnity from either insurer. However, as both insurers are liable, the doctrine of contribution between insurers has been evolved …" 6 In the same case, Kitto J said at 352, with the concurrence of Windeyer J: "What attracts the right of contribution between insurers, then, 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." 7 I turn, therefore, to the respective policies - noting, as I do so, three matters of significance: 1. The question of double insurance must be addressed at the date of casualty: AMP Workers' Compensation Services (NSW) Ltd v QBE Insurance Ltd [2001] NSWCA 267; (2001) 53 NSWLR 35. 2. The question of double insurance must be approached by reference to actually crystallised liabilities. Regard is to be had to burdens actually borne, not to what would or might have been the position if the victim of the casualty or his or her legal advisers had made choices other than those they in fact made and pursued to finality. This point is emphasised in the judgment of Handley JA (with whom Beazley JA and Tobias JA agreed) in Mercantile Mutual Insurance (Aust) Ltd v QBE Workers Compensation (NSW) Ltd [2004] NSWCA 409; (2004) 61 NSWLR 655 at [22] where the import of AMP Workers' Compensation Services (NSW) Ltd v QBE Insurance Ltd (above) is discussed. 3. Because of s 9(1)(e) of the Insurance Contracts Act 1984 (Cth), there is no need to consider any provisions of that Act dealing with double insurance. 8 The terms of the Zurich third-party policy in force on 13 October 2002 are those stated in s 10 of the Motor Accidents Compensation Act as in force at that time: "A third-party policy under this Act is a policy that is in the following terms: Third-party Policy 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 ." 9 This policy thus insured the "owner" of the particular vehicle against liability of the kind described. There is a definition of "owner" in s 4 of the Act to which it is not necessary to refer in detail at this point. 10 The GIO workers compensation policy, as in force at 13 October 2002, was in the following terms prescribed by the Workers Compensation (General) Regulation 1995 (in which references to "the Act" are references to the Workers Compensation Act 1987): "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 (but not including a liability for compensation in the nature of workers compensation arising under any Act or other 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); (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." 11 The dispute between Zurich and GIO concerns liability for the injury that Mr McLellan suffered in the incident of 13 October 2002. Mr McLellan was employed by Tiger Tours as a driver. He suffered injury when lifting or moving a heavy luggage compartment door on the vehicle MO7411. The "registered operator" of the vehicle, within the meaning of the Road Transport (Vehicle Registration) Act 1997, was Caringbah Bus Service Pty Ltd ("Caringbah Bus"). Its status as "registered operator" brought Caringbah Bus within the definition of "owner" in the Motor Accidents Compensation Act. Tiger Tours and Caringbah Bus were associated companies, in that each was owned and controlled by members of the Wood family. 12 Mr McLellan sued Caringbah Bus for damages in the District Court in proceedings 5584 of 2005. He did not sue Tiger Tours; nor did Caringbah Bus seek to join Tiger Tours as a party to the District Court action. Caringbah Bus admitted breach of a duty of care in negligence owed by Caringbah Bus to Mr McLellan. I quote from the judgment of 25 July 2007: "The plaintiff [Mr McLellan] alleged, inter alia, that mechanical aid should have been provided to meet the obvious danger which had been drawn to the defendant's [Caringbah Bus's] attention and that the defendant [Caringbah Bus] was liable as the owner of the coach. The defendant [Caringbah Bus] conceded that it had breached its duty of care to the plaintiff [Mr McLellan], thereby causing his injury." 13 An issue in the District Court proceedings between Mr McLellan and Caringbah Bus was whether s 151Z(2) of the Workers Compensation Act 1987 and the entitlement of Mr McLennan to statutory compensation under that Act operated to reduce the damages recoverable by Mr McLellan from Caringbah Bus. The court held that s 151Z(2) did not apply. That conclusion was reached on the basis that Tiger Tours, as well as Caringbah Bus, was an "owner" of the vehicle within the statutory definition in the Motor Accidents Compensation Act, with the result s 151E(2) of the Workers Compensation Act made irrelevant to the operation of s 151Z(2) any award of damages flowing from a finding of fault against Tiger Tours, being a finding against an "owner" of the vehicle. Undiminished damages were accordingly awarded to Mr McLellan against Caringbah Bus. 14 It is the contention of Zurich that the liability established by the District Court judgment was, in a relevant sense, the subject of not only the Zurich third-party insurance but also the GIO workers compensation insurance. 15 The submissions made by Mr Rewell SC on behalf of Zurich did not, however, attempt to make good the proposition that there was a contract of insurance written by GIO under which Caringbah Bus was an insured. Rather, Zurich concentrated on the implications of Tiger Tours' status as an "owner", in relation to the vehicle, for the purposes of the Motor Accidents Compensation Act. 16 If Tiger Tours was, as the District Court found, one of two "owners" of the vehicle (or, as Mr King SC postulated on behalf of GIO, the sole "owner"), the Zurich third-party policy insured Tiger Tours in the terms set out at paragraph [8] above against the liability there described. This is because it insured the "owner", whoever the "owner" might be. If the GIO workers compensation policy insured Tiger Tours against the same liability, the potential for principles of double insurance to operate as between Zurich and GIO is clear. 17 By the statutory third-party policy in terms of s 10 of the Motor Accidents Compensation Act, the "owner", as defined by that Act, was insured by Zurich against liability in respect of "injury" to a person "caused by the fault of" that owner. Section 3, as it stood at the relevant time, defined "injury" as follows: ""injury" : (a) means personal or bodily injury caused by the fault of the owner or driver of a motor vehicle in the use or operation of the vehicle if, and only if, the injury is a result of and is caused during: (i) the driving of the vehicle, or (ii) a collision, or action taken to avoid a collision, with the vehicle, or (iii) the vehicle's running out of control, or (iv) such use or operation by a defect in the vehicle, and (b) includes: (i) pre-natal injury, and (ii) psychological or psychiatric injury, and (iii) damage to artificial members, eyes or teeth, crutches or other aids or spectacle glasses," 18 Section 3 also defined "fault" - a defined term found not only in the s 10 policy wording (". . . caused by the fault of the owner or driver of the vehicle . . .") but also in the definition of "injury" just quoted (". . . caused by the fault of the owner or driver of a motor vehicle . . ."). The definition of "fault" was: "'fault' means negligence or any other tort." 19 Assuming that, as the District Court found, Tiger Tours was within the "owner" definition (as one of two "owners"), the overall result was that, if Tiger Tours was guilty of "negligence or any other tort" (that is, "fault" as defined) as against Mr McLellan and Mr McLellan's injury was "caused by" that "negligence" or "other tort", the Zurich third-party policy insured Tiger Tours against Tiger Tours' resultant liability to Mr McLellan. The Zurich third-party policy did not, however, provide protection to Tiger Tours except in relation to tortious liability of Tiger Tours. 20 Continuing on the assumption that Tiger Tours was within the "owner" definition, it may be accepted that the cover provided to Tiger Tours by the Zurich third-party policy corresponded, to a certain extent, with the cover provided to Tiger Tours by the GIO workers compensation policy. Each policy insured Tiger Tours against any liability of Tiger Tours for negligence to Mr McLellan that arose from the incident of 13 October 2002. The Zurich third-party policy applied to any such liability in negligence because of the connection to the vehicle. The GIO workers compensation policy applied to any such liability in negligence because of the connection to the employment. 21 But there was no finding in the District Court proceedings that Tiger Tours was liable on account of negligence or any other tortious conduct towards Mr McLellan. The finding there was that Caringbah Bus, which had the control of the vehicle, was negligent as against Mr McLellan and liable in damages accordingly. The question of any breach of a duty of care owed by Tiger Tours to Mr McLellan as an employee or otherwise did not arise. Given the way in which the District Court proceedings were constituted, there was no occasion for it to arise. 22 Nor can it be found in these present proceedings that Tiger Tours had a liability to Mr McLellan in negligence or otherwise for tort. Neither Tiger Tours nor Mr McLellan (or, as it now must be, his legal personal representative) is before the court - added to which there is simply no evidence of what Tiger Tours did or did not do in relation to the events of 13 October 2002. There is no basis for any finding that Tiger Tours committed "fault", in Motor Accidents Compensation Act terms, as against Mr McLellan. 23 There was a finding in the District Court that Tiger Tours was "exercising possession" of the vehicle at the time of Mr McLellan's injury. Precisely what that means in terms of acts or defaults of Tiger Tours relevant to any question of negligence or other tortious liability of Tiger Tours to Mr McLellan cannot be known. The finding, whatever its import, cannot, in any event, be the source of any liability as between Tiger Tours and Mr McLellan, since Tiger Tours was not a party to the proceedings in which the finding was made. 24 On no available view of matters can it be seen that Tiger Tours has incurred a liability for damages for negligent or other tortious conduct towards Mr McLellan. There is accordingly no basis for a finding of liability of Tiger Tours to which the Zurich third-party policy responded. It follows that, whatever may be the precise scope of the GIO workers compensation policy, no question of double insurance in relation to any such liability of Tiger Tours arises. 25 It seems to be the case that Mr McLellan's injury arose out of or in the course of his employment by Tiger Tours. If that were established, Mr McLellan would be entitled to statutory compensation from Tiger Tours in accordance with the Workers Compensation Act subject, of course, to the provisions of that Act. Any liability of Tiger Tours to pay statutory compensation would clearly be a liability against which Tiger Tours was insured by GIO under the workers compensation policy. But if such compensation were awarded, principles of double insurance would not apply between Zurich and GIO. Liability for workers compensation is not covered by the Zurich third-party policy: see Mercantile Mutual Insurance (Aust) Ltd v QBE Workers Compensation (NSW) Ltd (above). 26 I return at this point to a fundamental matter that is fatal to Zurich's present claim. It is a matter that was emphasised by Mr King SC in his submissions on behalf of GIO. The position Zurich postulates in relation to Tiger Tours and the insurances protecting Tiger Tours is entirely hypothetical and therefore not relevant to the matter at hand. As the Court of Appeal stressed in Mercantile Mutual Insurance (Aust) Ltd v QBE Workers Compensation (NSW) Ltd (above), questions of double insurance are to be answered by reference to actually crystallised liabilities, not liabilities that might have come into existence if the victim of the casualty had taken some course other than that in fact taken. Here, the only actually crystallised liability is that of Caringbah Bus to Mr McLellan established by the District Court judgment. Mr McLellan did not proceed against Tiger Tours either for damages in negligence or for workers compensation. Nor did Caringbah Bus join Tiger Tours as a co-defendant with a view to sheeting home to Tiger Tours, in whole or in part, liability owed to Mr McLellan. There is no established liability of Tiger Tours and therefore no established liability to which any insurance indemnifying Tiger Tours can possibly be responsive. 27 In short, this case is precisely of the kind described by Handley JA in Mercantile Mutual Insurance (Aust) Ltd v QBE Workers Compensation (NSW) Ltd (above) at [22]: "[A]ny liability which was originally covered by both policies was never crystallised but the liability that did was not covered by both policies." 28 The conclusions I have reached make it unnecessary for me to come to any view about the correctness of the proposition (on which there were competing submissions) that, under the Motor Accidents Compensation Act, there can be more than one "owner" of a vehicle at any given time. 29 In the result, the proceedings will be dismissed and Zurich will be ordered to pay GIO's costs.

Zurich Australian Insurance Ltd v GIO General Ltd

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