Time is of the essence when deciding which insurer is on risk – CGU Insurance Limited v AAI Limited [2016] NSWCA 335
Originally Published by Andrew Spearitt on Thursday, December 15, 2016 12:00:00 AM
Author: Andrew Spearritt
Judgment Date: 12th December, 2016
Citation: CGU Insurance Limited v AAI Limited [2016] NSWCA 335
Jurisdiction: New South Wales Court of Appeal[1]
Principles
- Section 151AB of the Workers Compensation Act 1987 (the WCA) provides that, for the purposes of a policy of insurance obtained by an employer, "liability is taken to have arisen when the worker was last employed by the employer in the employment to the nature of which the disease was due".
- The New South Court of Appeal (NSWCA) confirmed that the insurer liable under s 151AB of the WCA is the insurer on risk when the worker was last employed by the employer to do work that exposed the worker to asbestos. If there is evidence of work involving exposure to asbestos throughout the whole period of a worker's employment, then the insurer on risk as at the worker's last date of employment is the s 151AB insurer.
Background
Kevin Hastings (the plaintiff) commenced proceedings in the Dust Diseases Tribunal of New South Wales (the DDT) seeking damages to compensate him for the condition of mesothelioma, alleged to have arisen from his occupational exposure to asbestos.
The plaintiff alleged he was exposed to asbestos during his employment with JA Westaway & Son Pty Limited (Westaway) from 15 September 1981 to 19 December 1986.
The following insurers issued employers' indemnity insurance to Westaway during the following periods, all commencing at 4:00 pm:
The plaintiff made a claim against Amaca Pty Limited (Amaca) as the sole defendant on the basis that it was the manufacturer and/or supplier of the asbestos cement building products to which the plaintiff was exposed during his employment with Westaway.
Amaca issued cross-claim proceedings against AAI on the basis that it was on risk as at the last date of the plaintiff's employment with Westaway. AAI asserted that the plaintiff was last exposed to asbestos prior to 4:00 pm on 14 December 1986, and as a result, CGU was joined to the proceedings.
The plaintiff's claim for damages resolved for the sum of $5,600,000 plus costs. Amaca, AAI and CGU agreed that the insurer liable to indemnify Westaway would contribute $2,240,000 or 40% of the damages paid to the plaintiff plus costs.
The relevant issue in dispute was whether AAI or CGU was liable to indemnify Westaway in respect of its liability to Mr Hastings, by reference to s 151AB of the WCA.
The outcome hinged on whether or not the plaintiff was exposed to the risk of inhaling asbestos dust and fibre during the last five days of his employment, that is, from 14 December 1986 to 19 December 1986. If so, then AAI was liable, but if not, then CGU was liable to indemnify Westaway.
For the full background of this case please refer to our previous Case Note on the DDT's decision in Amaca Pty Limited v AAI Limited & Anor
The plaintiff alleged he was exposed to asbestos during his employment with JA Westaway & Son Pty Limited (Westaway) from 15 September 1981 to 19 December 1986.
The following insurers issued employers' indemnity insurance to Westaway during the following periods, all commencing at 4:00 pm:
- AAI Limited (AAI) – prior to 15 September 1981 until 4:00 pm on 14 December 1985;
- CGU Insurance Limited (CGU) – 14 December 1985 until 4:00 pm on 14 December 1986;
- AAI – 14 December 1986 until after 19 December 1986.
The plaintiff made a claim against Amaca Pty Limited (Amaca) as the sole defendant on the basis that it was the manufacturer and/or supplier of the asbestos cement building products to which the plaintiff was exposed during his employment with Westaway.
Amaca issued cross-claim proceedings against AAI on the basis that it was on risk as at the last date of the plaintiff's employment with Westaway. AAI asserted that the plaintiff was last exposed to asbestos prior to 4:00 pm on 14 December 1986, and as a result, CGU was joined to the proceedings.
The plaintiff's claim for damages resolved for the sum of $5,600,000 plus costs. Amaca, AAI and CGU agreed that the insurer liable to indemnify Westaway would contribute $2,240,000 or 40% of the damages paid to the plaintiff plus costs.
The relevant issue in dispute was whether AAI or CGU was liable to indemnify Westaway in respect of its liability to Mr Hastings, by reference to s 151AB of the WCA.
The outcome hinged on whether or not the plaintiff was exposed to the risk of inhaling asbestos dust and fibre during the last five days of his employment, that is, from 14 December 1986 to 19 December 1986. If so, then AAI was liable, but if not, then CGU was liable to indemnify Westaway.
For the full background of this case please refer to our previous Case Note on the DDT's decision in Amaca Pty Limited v AAI Limited & Anor
Decision
DDT decision
On 1 March 2016 the primary judge of the DDT delivered judgment in favour of AAI, resulting in CGU being found liable to indemnify Westaway.
The primary judge found that the plaintiff was last exposed to the risk of inhaling asbestos dust and fibre sometime between 14 December 1985 and 14 December 1986, when CGU were on risk.
The primary judge's decision was based on a finding that there was less than a 50% chance that the plaintiff was exposed to asbestos between 15 December 1986 and 19 December 1986 when AAI were on risk, and therefore, liability did not arise during that period.
As a result, CGU was found liable to indemnify Westaway because it was on risk during the period ending 14 December 1986.
NSWCA decision
CGU appealed the DDT decision on the basis that the primary judge erred in holding that the plaintiff was last employed in employment to the nature of which his disease was due during CGU's period of insurance, within the meaning of s 151AB of the WCA.
On 12 December 2016, Emmett AJA, with McColl and Gleeson JJA agreeing, set aside the DDT decision, finding that AAI was liable to indemnify Westaway.
His Honour held that the test in s 151AB of the WCA is concerned with exposure to a risk that may be causative of the disease. It requires proof, on the balance of probabilities, that the nature of the worker's employment exposed him to a risk of contracting the disease.
His Honour considered that attention must be directed to the kind of work being performed by a worker at various times. His Honour referred to the decision of CIC Workers Compensation (NSW) Limited v Alcan Australia Limited,2 finding that if there is a material change in the nature of a worker's employment, then the s 151AB insurer is the insurer on risk when the worker was last employed to do work that exposed him to asbestos.
His Honour also referred to the decision of Wellcome Australia Ltd v Australia Eagle Insurance Co Limited,3 confirming that an insurer will not be liable under s 151AB of the WCA if it came on risk after the source of the disease (the materials containing asbestos dust and fibre) is removed.
His Honour considered that the primary judge did not direct attention to, or make a finding about, the nature of the plaintiff's employment from 14 December 1986 to 19 December 1986. Further, his Honour was of the opinion that the evidence before the DDT was incapable of supporting a finding that the nature of the plaintiff's employment changed between 14 December 1986 and 19 December 1986. His Honour noted that there was no evidence of the actual work which the plaintiff was performing in the last five days of his employment with Westaway.
His Honour held that whether or not the plaintiff's actual work involved exposure to asbestos dust and fibre was not to the point, as there was evidence of demolition throughout the whole period of his employment, including up to 19 December 1986.
Accordingly, his Honour held that the liability of Westaway was taken to have arisen on 19 December 1986 when the plaintiff was last employed by Westaway in employment to the nature of which the disease was due. Therefore, his Honour held that there was an error in point of law because the primary judge failed to have regard to the true construction of s 151AB of the WCA.
AAI were found liable to indemnify Westaway because it was on risk as at the plaintiff's last date of employment.
On 1 March 2016 the primary judge of the DDT delivered judgment in favour of AAI, resulting in CGU being found liable to indemnify Westaway.
The primary judge found that the plaintiff was last exposed to the risk of inhaling asbestos dust and fibre sometime between 14 December 1985 and 14 December 1986, when CGU were on risk.
The primary judge's decision was based on a finding that there was less than a 50% chance that the plaintiff was exposed to asbestos between 15 December 1986 and 19 December 1986 when AAI were on risk, and therefore, liability did not arise during that period.
As a result, CGU was found liable to indemnify Westaway because it was on risk during the period ending 14 December 1986.
NSWCA decision
CGU appealed the DDT decision on the basis that the primary judge erred in holding that the plaintiff was last employed in employment to the nature of which his disease was due during CGU's period of insurance, within the meaning of s 151AB of the WCA.
On 12 December 2016, Emmett AJA, with McColl and Gleeson JJA agreeing, set aside the DDT decision, finding that AAI was liable to indemnify Westaway.
His Honour held that the test in s 151AB of the WCA is concerned with exposure to a risk that may be causative of the disease. It requires proof, on the balance of probabilities, that the nature of the worker's employment exposed him to a risk of contracting the disease.
His Honour considered that attention must be directed to the kind of work being performed by a worker at various times. His Honour referred to the decision of CIC Workers Compensation (NSW) Limited v Alcan Australia Limited,2 finding that if there is a material change in the nature of a worker's employment, then the s 151AB insurer is the insurer on risk when the worker was last employed to do work that exposed him to asbestos.
His Honour also referred to the decision of Wellcome Australia Ltd v Australia Eagle Insurance Co Limited,3 confirming that an insurer will not be liable under s 151AB of the WCA if it came on risk after the source of the disease (the materials containing asbestos dust and fibre) is removed.
His Honour considered that the primary judge did not direct attention to, or make a finding about, the nature of the plaintiff's employment from 14 December 1986 to 19 December 1986. Further, his Honour was of the opinion that the evidence before the DDT was incapable of supporting a finding that the nature of the plaintiff's employment changed between 14 December 1986 and 19 December 1986. His Honour noted that there was no evidence of the actual work which the plaintiff was performing in the last five days of his employment with Westaway.
His Honour held that whether or not the plaintiff's actual work involved exposure to asbestos dust and fibre was not to the point, as there was evidence of demolition throughout the whole period of his employment, including up to 19 December 1986.
Accordingly, his Honour held that the liability of Westaway was taken to have arisen on 19 December 1986 when the plaintiff was last employed by Westaway in employment to the nature of which the disease was due. Therefore, his Honour held that there was an error in point of law because the primary judge failed to have regard to the true construction of s 151AB of the WCA.
AAI were found liable to indemnify Westaway because it was on risk as at the plaintiff's last date of employment.
Why this case is important
This case confirms that the insurer on risk when a worker was last exposed to the risk of inhaling asbestos dust and fibre is liable to indemnify the employer under s 151AB of the WCA.
Where more than one insurer has provided employers' indemnity insurance to an employer during the period of a worker's employment, then insurers should ensure that the particulars of exposure are carefully reviewed.
The case reinforces the point that the test under s 151AB is not concerned with causation in fact but with exposure to a risk that may be causative of the occupational disease from which the worker suffers. In this respect it is the nature of the worker's employment which is critical.
Where more than one insurer has provided employers' indemnity insurance to an employer during the period of a worker's employment, then insurers should ensure that the particulars of exposure are carefully reviewed.
The case reinforces the point that the test under s 151AB is not concerned with causation in fact but with exposure to a risk that may be causative of the occupational disease from which the worker suffers. In this respect it is the nature of the worker's employment which is critical.
1 McColl and Gleeson JJA, Emmett AJA.
2 (1994) 35 NSWLR.
3 (1993) 34 NSWLR 269.