WHO SHOULD READ THIS

  • Managers responsible for workers’ compensation and/or claims

THINGS YOU NEED TO KNOW

  • Proposed legislative amendments before the Queensland Parliament will allow WorkCover Queensland to avoid honouring contractual indemnities agreed to by employers in favour of third parties.

WHAT YOU NEED TO DO

  • Managers need to review any current contractual arrangements and consider whether their public liability insurance policy covers any gaps created by these new amendments.

On 14 June 2016, the Queensland Government introduced the Workers’ Compensation and Rehabilitation (National Injury Insurance Scheme) Amendment Bill 2016 (Bill) to parliament.

While the main objective of this Bill is the introduction of the National Injury Insurance Scheme to Queensland, the Bill also proposes to amend the existing definition of ‘damages’ in the current Workers Compensation and Rehabilitation Act 2003 (Qld). This will see a reduction in WorkCover’s responsibility to pay damages to an injured employee where a contractual indemnity exists between an employer and a wrongdoing contracting party.

The proposed amendment to the definition of ‘damages’ will restrict the amount payable by WorkCover when the following circumstances exist:

  • an employee is injured in the course of their employment
  • the injured employee brings a common law claim against his or her employer
  • a third party is wholly or partially liable for the injuries sustained by the employee, and
  • the contractual arrangements between the employer and the third party were such that the employer agreed to indemnify the third party for the third party’s negligence. In other words, the employer contractually agreed with the third party to cover any negligence on the part of the third party in causing the employee’s injury.

The decision in Byrne v People Resourcing (Qld) Pty Ltd & Anor [2014] QSC 269, pronounced that WorkCover was required to honour the contractual indemnity between the employer and the third party.

The proposed amendment will allow WorkCover to avoid honouring any contractual indemnity in favour of any contracting third party who causes injury to the employee of the employer.

Essentially this will mean that an employer who enters into a contractual indemnity with a third party will have to pay any damages pursuant to the contractual indemnity to the injured worker on their own.

The Bill also proposes a provision to allow WorkCover to bring a contribution claim against a third party, even though the contractual indemnity between the employer and the third party exists. In this situation, any contractual indemnity between the employer and the third party is void to the extent of any contribution claim made against the third party by WorkCover. This additional provision is relevant only in situations where the injured worker has brought a claim against his or her employer only, and not directly against the third party.

Both amendments will have a significant impact on employers and third parties to workers’ compensation claims. We also note that if the Bill is passed, it will apply retrospectively to all claims in progress if at the time of commencement, settlement for damages has not been agreed or a court has not started hearing a proceeding for the claim.

The amendments serve as a timely reminder to employers to ensure their public insurance policies are updated to provide the necessary cover for these new potential liabilities. It would also be beneficial to try and resolve any current matters where there is a third party contractual indemnity that WorkCover would (prior to the new amendments) be required to cover the employer for..