Contribution on the basis of double insurance - the extended principle
19Contribution 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. It is sufficient to refer to Albion Insurance Co Ltd v Government Insurance Office of New South Wales (1969) 121 CLR 342 at 345-6 per Barwick CJ and McTiernan and Menzies JJ and at 349-352 per Kitto J with whom Windeyer J agreed. Kitto J explained the basic concept as one of natural justice and, amongst other expressions and citing Dering v Winchelsea (1787) 1 Cox Eq Cas 318 at 321; 29 ER 1184 at 1185, as one "bottomed and fixed on general principles of justice". In Burke v LFOT Pty Ltd [2002] HCA 17; (2002) 209 CLR 282 at [22] Gaudron ACJ and Hayne J said that -
" ... the doctrine of equitable contribution is founded on concepts of fairness and justice - 'natural justice', as that term was explained by Kitto J in Albion Insurance Co Ltd v Government Insurance Office (NSW) . In this context, 'natural justice' requires that if 'one of several persons has paid more than his proper share towards discharging a common obligation' he is entitled to be recompensed by those who have not."
20Caringbah had been held liable to Mr McLellan in respect of his injury, and as owner of the coach was entitled to indemnity from Zurich against that liability. It had been indemnified as to $256,525.52 by payment direct to Mr McLellan. It may be accepted that, subject to its claim that there was double insurance, Zurich stood ready completely to indemnify Caringbah by payment of $172,834.48 direct to GIO.
21However, Caringbah was not entitled to indemnity from GIO in respect of its liability to Mr McLellan. It was not a case of one insured entitled to indemnity from two different insurers in respect of the same liability. On the judge's holding, there were two different insureds which could each be liable, although for the same injury to Mr McLellan. Hence Zurich invoked an extension of the principle of contribution on the basis of double insurance, relying on AMP Workers Compensation Services (NSW) Ltd v QBE Insurance Ltd [2001] NSWCA 267; (2001) 53 NSWLR 35 ("the AMP case").
22In the AMP case an employee, Mitchell, was injured by the negligent driving of another employee, Graupner, for whose negligence the employer was vicariously liable. Mitchell sued Graupner, but did not sue the employer. The employer's third party insurance with QBE in respect of the vehicle covered the employer's liability as owner and Graupner's liability as driver. The employer also held workers compensation insurance with AMP, which extended to the employer's common law liability to its workers but did not cover negligent employees such as Graupner. There was consent judgment for Mitchell against Graupner. QBE paid Mitchell, and claimed contribution from AMP on the basis of double insurance.
23Handley JA, with whom Mason P and Beazley JA agreed, held that QBE was entitled to contribution.
24His Honour noted that if Mitchell had sued the employer and obtained judgment for the same amount, there would have been double insurance. He said that AMP contended that it had not insured Graupner, who had been sued, and that the employer, which it had insured, had not been sued and was not entitled to indemnity under its policy.
25His Honour held that the date for determining double insurance was the date of Mitchell's injury, at which time the relevant liabilities arose, not the date when contribution was claimed. The employer was vicariously liable for the negligent driving of Graupner, and they were joint tortfeasors. The employer's liability was potentially covered by both policies, but its rights of indemnity would not accrue until its liability to Mitchell had been "crystallised" (at [9]) by settlement or verdict. This did not occur, because Mitchell sued Graupner as sole defendant. But an insured's choice to claim indemnity from one insurer rather than another should not leave the one insurer with the whole burden; and on the same principle, the choice of the injured party (Mitchell) to sue one insured (Graupner) rather than another (the employer) or both should not leave the whole burden on the insurer of the one insured (Q BE) . There should be contribution by the insurer of the other insured (AMP).
26His Honour said -
"24 In this case the employer had double insurance and Mitchell could choose his defendants, but in principle this should make no difference. The insured's decision to claim against one insurer rather than the other or both was not allowed to unjustly enrich the other, but contribution could be enforced so that all would share the burden equally. Similarly the more or less arbitrary decision by Mitchell to sue the driver and not the employer or both jointly should not be permitted to impose the whole burden on QBE to the exoneration of AMP. Both should contribute equally and would have done so if Mitchell had sued the employer or both driver and employer.
25 The contribution principle is based on "general principles of justice" (Albion Insurance at 351 per Kitto J). In my judgment there is no reason in precedent or principle why the right of contribution should be defeated by the existence of a second layer of choice available to another party. In a case such as the present it should not rest with either of the persons who had available choices to exercise those choices in a way which would leave the ultimate burden on one of the insurers without any right of contribution from the other."
27In Mercantile Mutual Insurance (Australia) Ltd v QBE Workers Compensation (NSW) Ltd ("the MMI case") [2004] NSWCA 409; (2004) 61 NSWLR 655 at [11] Handley JA succinctly said -
"The AMP case simply extended the contribution principle established since the time of Lord Mansfield where the insured had a choice, to a case where someone else had a choice which also could be exercised to leave one insurer with the whole burden."
28An application for special leave to appeal from the AMP case was dismissed, the High Court saying that "the actual decision .... is not attended with sufficient doubt to warrant the grant of special leave" ([2002] HCA Tran 367).
29The AMP Case was distinguished in the MMI case. In the MMI case an employee was injured in circumstances said to have arisen from the use or operation of the employer's vehicle. He was paid compensation by the employer's workers compensation insurer, QBE, whose workers compensation policy also covered the employer for its common law liability to its employees. The employer held third party insurance with MMI covering its liability as owner of the vehicle for injury to the employee. QBE claimed from MMI contribution to the workers compensation payments made to the employee, contending that the accident created a liability in the employer to the employee for which the employer was indemnified under both policies.
30Handley JA, with whom Beazley and Tobias JJA agreed, held that the extended contribution principle did not apply. The employee had not sued to enforce a common law liability. The payments made by QBE discharged a liability to pay workers compensation and only that liability, which was not insured by MMI. The AMP case was distinguished because -
"12 In that case the liability that accrued at the time of the casualty matured into an actual liability or loss. Damages became payable and were paid by the motor vehicle insurer. In the present case any liability in damages that may have accrued on 8 March 1993 has never matured into an actual liability or loss. Damages never became payable and will never be paid.
13 In the events that have happened any liability in damages that arose at the time of the casualty has become entirely theoretical. Although this is the result of the choice of the worker that choice has not operated to place the whole burden of the liability for damages on one of the insurers. The result of his choice is that there is no liability for those damages on either insurer. There is no inequality of burden, and so far as damages are concerned there is no burden at all. The basis for a claim for contribution is lacking."
31His Honour later said -
"22 There is also nothing in the AMP case (2001) 53 NSWLR 35 which requires this Court to hold that a right of contribution has arisen in this case. There a liability in damages accrued at the time of the casualty which was covered by both policies. The injured worker brought an action to enforce his right to damages and recovered $450,000 inclusive of costs which was paid by the motor vehicle insurer. As a result of choices made by the worker and his legal representatives the liability which originally had been covered by both policies was crystallised by a settlement which placed the whole burden on one of the insurers, but we held that this did not defeat the latter's right to contribution. Nothing was said which governs the present use [sic: case] where any liability which was originally covered by both policies was never crystallised and the liability that did was not covered by both policies."
32The extended contribution principle in the AMP case has been referred to or considered in a number of subsequent cases.
33In Workcover Queensland v Suncorp Metway Insurance Ltd [2005] QCA 155; (2005) 2 Qd R 210 Workcover insured the partnership of Mr and Mrs White, which employed Carter. Suncorp insured Mr White as owner of the vehicle Carter was driving when he was injured. Carter sued the White partnership. The action was settled. Workcover provided indemnity, and claimed contribution from Suncorp.
34The AMP case was applied in rejecting Suncorp's submission that there had to be identical insureds, and also in rejecting Suncorp's submission that the contribution should be only to Mr White's half share of the partnership liability because it had not insured Mrs White. Jerrard JA, with whom McMurdo P and Douglas J relevantly agreed although McMurdo P dissented in the result, pointed out at [46] that Handley JA had spoken of two or more insurers being on risk in respect of the same loss or liability, and that "that statement of principle does not refer to the necessity for an identical insured, but rather the identical loss or liability". As to the extent of contribution, his Honour accepted that the relevant date was the date of the injury and said at [52] that "on that date the inchoate liability of both the insurers to Mr White existed in full". Douglas J said also at [59] that "each insurer's ... liability was to indemnify their insured to an unlimited extent for the full amount of the damages suffered by Mr Carter".
35In Allianz Australia Workers Compensation (NSW) Ltd v NRMA Insurance Ltd [2007] ACTSC 2 and GIO General Ltd v Insurance Australia Ltd [2008] ACTSC 38 Harper M was "fortified" (at [30] and [26] respectively) by the AMP case in concluding that the way in which the insured person's claim was pleaded - as an unsafe system of work, not negligence in relation to a motor vehicle - was not determinative of double insurance between the workers compensation insurer and the third party insurer. GIO General Ltd v Insurance Australia Ltd was a case of a single insured, and double insurance was found. In Allianz Australia Workers Compensation (NSW) Ltd v NRMA Insurance Ltd the injured employee sued his employer Trueform, insured by Allianz, but the owner of the vehicle under the broad equivalent of the MAC Act was Abbey, insured by NRMA. The AMP case was distinguished as a case in which the employer and the owner were identical, but the more fundamental differences were that Trueform was not insured under the third party policies and that Abbey would not if sued have been liable.
36The AMP case was again distinguished in Collyear v CGU Insurance Ltd [2008] NSWCA 92. It was a case of loss insurance, not liability insurance. Emibarb's interest as lessee of premises and the Trustee's interest as owner of the premises were covered under a Lloyds policy. The Trustee's interest as owner of the premises was also covered under a CGU policy. The premises were damaged by fire. Emibarb reinstated them, as it was obliged to do under the lease. Lloyds paid Emibarb and claimed contribution from CGU. It was held that the relevant risks were not the same. The Lloyds payment had been made in respect of Emibarb's obligation to reinstate the premises, which was not within CGU's cover, and the Trustee had not suffered loss because the premises had been reinstated.
37The time for determining double insurance as held in the AMP case was applied in QBE Insurance (Australia) Ltd v Lumley General Insurance Ltd [2009] VSCA 124; (2009) 24 VR 326, with a qualification as to terminology and leaving open that double insurance might not be determined at the time of the "insuring clause event" where that "would subvert rather than promote the underlying rationale and purpose of the contribution principle" (at [69]). Their Honours' summary of principles at [70] was in terms of two insurers of a common insured, but included -
" (c) Other examples of events occurring after the insuring clause event which will usually not affect the first insurer's right of contribution include:
(i) a decision by a plaintiff to sue a person who is a joint tortfeasor with the common insured by virtue of the latter being vicariously liable for the former's negligence, and to enforce judgment against the joint tortfeasor in circumstances where the joint tortfeasor is an insured under the first policy but not the second policy; [footnote; the AMP case]"
38None of these cases involved facts similar to the present facts, but no doubt was cast on the extension of the contribution principle in the AMP case. The extension was not questioned in this appeal. As will be seen, GIO submitted that it did not apply on the present facts.