AAI Limited t/as Vero Insurance v Geo Group Australia Pty Limited

[2017] NSWCA 110

Court of Appeal

Supreme Court

New South Wales

• Summary available

Medium Neutral Citation:	AAI Limited t/as Vero Insurance v GEO Group Australia Pty Limited [2017] NSWCA 110
Hearing dates:	20 March 2017
Decision date:	25 May 2017
Before:	Macfarlan JA at [1]; Simpson JA at [2]; Payne JA at [3].
Decision:	(1)   Appeal dismissed; (2)   Appellant to pay the respondents costs as agreed or assessed.
Catchwords:	APPEAL – insurance – failure to assess inmate of a correctional centre for risk of self harm – whether claim falls within the terms of the policy
Cases Cited:	Vero Insurance Ltd v Australian Prestressing Services Pty Ltd [2013] NSWCA 181
Category:	Principal judgment
Parties:	AAI Limited t/as Vero Insurance (Appellant) GEO Group Australia Pty Limited (Respondent)
Representation:	Counsel: J E Marshall SC / P A Horvath (Appellant) A P Cheshire SC / M F Newton (Respondent)   Solicitors: Moray & Agnew (Appellant) HWL Ebsworth (Respondent)
File Number(s):	2016/207212
Decision under appeal	Court or tribunal: Supreme Court of New South Wales Jurisdiction: Common Law Division Citation: [2016] NSWSC 803 Date of Decision: 17 June 2016 Before: Schmidt J File Number(s): 2013/68804

headnote

[This headnote is not to be read as part of the judgment]

GEO Group Australia Pty Ltd (“GEO”), the respondent on the appeal, is the operator of Parklea Correctional Centre (“Parklea”). In 2010, an inmate at Parklea, Mr Mace, jumped off an upper landing and suffered serious physical injuries and brain injuries. The inmate brought claims in negligence for personal injury against a number of parties, including GEO. In 2015, GEO settled the claim against it.

GEO pursued a cross-claim against AAI Limited t/as Vero Insurance (“Vero”), with whom it had a “Medical Malpractice Civil Liability Insurance Policy” (“the Policy”). The Policy indemnified GEO against civil liability for claims made against GEO resulting from “the conduct of the Healthcare Services”. Healthcare Services was exclusively defined as “the provision of medical services and treatment including services and treatment provided by psychologists and counsellors”.

The primary judge found that Vero was liable to indemnify GEO under the Policy. Vero appealed from this decision.

The Court of Appeal, dismissing the appeal, held, per Payne JA (Macfarlan and Simpson JJA agreeing):

1. The language of the coverage provision of the Policy, in the context of the other terms of that contract, favours the conclusion that the pleaded claim by Mr Mace against GEO, which pleading was repeated by GEO against Vero, was a claim “resulting from the conduct of the Healthcare Services”, as those terms are further defined in the Policy: at [55].

2. An objective observer would conclude that the parties intended that the “conduct” of the Healthcare Services included an omission by GEO to provide Healthcare Services: at [56].

3. The primary judge was correct to conclude that the insuring clause was broad enough to provide cover to GEO in circumstances where, by reason of a failure of GEO’s healthcare systems to identify Mr Mace as requiring assistance, he suffered loss or damage. This is because that omission, properly characterised, was a result of the conduct by GEO of Healthcare Services, namely the omission as part of the Healthcare Services GEO was otherwise providing to inmates at Parklea to identify Mr Mace’s risk of self-harm: at [64].

4.    The “conduct” of Healthcare Services extended to acts and omissions in identifying and assessing inmates for the purpose of determining which further health services and treatments were required: at [65]   

5. At the time of Mr Mace’s admission, GEO was engaged in providing Healthcare Services to inmates at Parklea and that the failure to assess Mr Mace was an omission in the course of provision of Healthcare Services to inmates. The claim resulted from the conduct of Healthcare Services: at [67].

Judgment

1. MACFARLAN JA: I agree with the orders that Payne JA proposes and with his Honour’s reasons for judgment.

2. SIMPSON JA: I agree with Payne JA.

3. PAYNE JA: This is an appeal by an insurer from a decision arising from a personal injury suffered by an inmate at Parklea Correctional Centre (“Parklea”). The prisoner, Mr Shayne Mace (by his tutor), brought claims in negligence for personal injury against a number of parties, including the present respondent, the GEO Group Australia Pty Ltd (“GEO”), for injuries he suffered in March 2010, while an inmate at Parklea. GEO was at that time the new private operator of Parklea. Those claims were settled on terms approved by Harrison J in the Supreme Court in December 2015.

4. GEO pursued a cross-claim against AAI Limited t/as Vero Insurance (“Vero”), with whom it had a “Medical Malpractice Civil Liability Insurance Policy” (“the Policy”). GEO made a claim under the Policy in respect of Mr Mace’s claim in May 2012. GEO was successful before the primary judge, who found that Vero was liable to indemnify GEO under the Policy for the payment made by it to Mr Mace.

Brief facts

5. On 18 February 2010, Mr Mace was charged with armed robbery offences and held in the police cells at Campbelltown overnight. On 19 February 2010, he was refused bail and was transferred to the Metropolitan Reception and Remand Centre in Silverwater, where he was placed in protective custody because he was fearful of other inmates.

6. On 3 March 2010, Mr Mace was transferred to Parklea on remand where he remained in protective custody.

7. As the new private operator of Parklea, GEO was contractually obliged to the State of NSW to provide psychological and counselling services to inmates at the prison. A variety of other medical services were agreed between GEO and the State to be provided to inmates by Justice Health, a NSW Government health services provider.

8. Upon arrival at Parklea, Mr Mace was assessed by employees of Justice Health in the prison’s reception area. He advised them that he was taking medication for schizophrenia and depression. He was not provided with any medication to address those conditions. He was identified as being on the methadone program and provided with that drug by Justice Health in the reception area.

9. He was seen again by employees of Justice Health the following day, 4 March 2010, for a review of his methadone dosage. He was also provided with medication to treat constipation. He was not provided with medication to treat schizophrenia or depression. There is no record of Mr Mace having any contact with Justice Health (or any health services provider) after 4 March 2010.

10. On 7 March 2010, Mr Mace jumped off an upper level landing at Parklea and suffered serious injuries. The particulars of negligence in his statement of claim identified serious physical injuries and brain injuries incurred as a result of the fall.

11. It was common ground that no psychologist or counsellor employed by GEO had any contact at all with Mr Mace prior to the incident in which Mr Mace was injured.

The proceedings brought by Mr Mace

12. Mr Mace sued the State of New South Wales, Justice Health and the present respondent, GEO, the private operator of Parklea, in the Supreme Court. The case was settled by all three defendants.

13. The essence of Mr Mace’s claim against GEO was that it failed to conduct an appropriate risk assessment of Mr Mace upon his arrival at Parklea or at all, that it failed to provide him with access to psychological services and that it failed to refer him to Justice Health (who employed medical professionals with the authority to prescribe relevant medication) for treatment or further assessment. As against GEO (described in the pleading as the “third defendant”), Mr Mace’s pleaded case was as follows:

“11. On 18 February 2010, the Plaintiff was arrested for and charged with, the offence of Aggravated Break and Enter contrary to section 112 of the Crimes Act 1900. Upon being arrested, the Plaintiff was held in the police cells at Campbelltown overnight before appearing in the Local Court the following morning, where he was refused bail and then transferred to the MRRC.

12. The Plaintiff was an inmate in the care, control and custody of the Second Defendant:

1. At MRRC from 19 February 2010 to 3 March 2010; and

2. At Parklea from 3 to 7 March 2010.

13. The Plaintiff requested protective custody at the MRRC on 28 February 2010, advising that he felt threatened by Middle Eastern gangs.

14. At no time whilst an inmate at the MRRC was the Plaintiff assessed by the Risk Assessment and Intervention Team (RAIT).

15. At all material times, the Third Defendant had the care, control and management of Parklea.

16. The Third Defendant operated Parklea pursuant to a contract with the Second Defendant.

17. The Plaintiff was an inmate in the care, control and custody of the Third Defendant from 3 March 2010 to 7 March 2010.

18. At all material times, the Third Defendant owed the Plaintiff a duty of care to adopt reasonable measures to reduce the risk of foreseeable harm to the Plaintiff when it knew or ought to have known that the Plaintiff was suffering from chronic schizophrenia.

Particulars

(a) Reasonable measures to reduce the risk of foreseeable harm included:

(i) referring the Plaintiff to the First Defendant for assessment to determine whether the Plaintiff required medication to be prescribed and administered for the treatment of the Plaintiff’s chronic schizophrenia condition;

(ii) Conducting an initial classification assessment on arrival at Parklea;

(iia) Conducting an interview based upon the Plaintiff’s intake Screening Form within 36 hours of arriving at Parklea;

(iii) administering medication prescribed for the treatment of the Plaintiff’s chronic schizophrenia condition;

(iv) where an assessment of the kind referred to in (i) above showed that the Plaintiff was at risk of self-harm, taking reasonable steps to reduce this risk including close supervision and monitoring of the Plaintiff.

19. At all material times, the First, Second and Third Defendants knew or ought to have known that the Plaintiff was taking the anti-psychotic medication Zyprexa and the anti-depressant medication Avanza at the time of his arrest on 18 February 2010.

20. At all material times, the First, Second and Third Defendants knew or ought to have known that the Plaintiff continued to require taking the anti- psychotic medication Zyprexa and the anti-depressant medication Avanza during the remand period.

21. At no time from 19 February 2010 to 7 March 2010 did the Plaintiff receive Zyprexa or Avanza or any other form of antipsychotic or anti-depressive medication nor were they administered to him by any officer servant or agent of any of the defendants.

22. The Plaintiff requested Olanzapine and Avanza from representatives of the First Defendant on more than one occasion when he was a prisoner inmate at the MRRC and Parklea Correctional Centre.

23. The Plaintiff, whilst at the MRRC and at the Parklea Correctional Centre, was displaying and/or expressing signs of acute mental illness.

Particulars

(a) The Plaintiff did not interact with other inmates;

(b) The Plaintiff remained in his cell as much as possible;

(c) The Plaintiff returned to his cell at any available opportunity.

24. At all material times the First, Second and Third Defendants were aware of information about the Plaintiff’s history of mental illness.

25. While the Plaintiff was in Parklea, the Plaintiff rang his mother and told her that someone was 'trying to get him'. He told his mother that she needed to move out of her house and to move immediately and then he would know she was safe.

26. On 7 March 2010, the Plaintiff threw himself from a landing in 5C Block of Parklea. The Plaintiff landed on his upper back and neck. The Plaintiff was transported to Westmead Hospital by ambulance. The Plaintiff underwent a craniotomy to evacuate an extradural haematoma on 9 March 2010.

…

31. The Third Defendant negligently breached the said duty of care to the Plaintiff in:

PARTICULARS OF THE NEGLIGENCE OF THE THIRD DEFENDANT

(a) Failing to watch, supervise and closely monitor the Plaintiff while he was an inmate at Parklea;

(b) Failing to undertake an appropriate risk assessment regarding the Plaintiff, given: (1) the information known and recorded about him on his reception to Parklea; (2) the information about the Plaintiff regarding his time at the MRRC between 9 February 2010 and 7 March 2010; and (3) his known history of mental illness and previous self-harm recorded in the Third Defendant's files;

(c) Failing to consider the fact that the Plaintiff was not taking antipsychotic and/or anti-depressive medication since he was remanded in custody in exercising its responsibilities regarding risk assessment and risk abatement with regard to the Plaintiff as an inmate at Parklea Correctional Centre and failing to act to protect the Plaintiff from self-harm in the light of this fact;

(d) Failing to provide the Plaintiff access to psychological services in the light of the Third Defendant's knowledge of the Plaintiffs history of mental illness, his history of self-harm and his concerns he expressed about his own safety in the MRRC;

(e) Failing to recognise that the Plaintiff was displaying symptoms of acute mental illness and/or failing to properly assess and observe the Plaintiff’s symptoms of acute mental illness; and

(f) Failing to refer him to the First Defendant for treatment or further assessment;

(g) Failing to conduct an initial classification assessment on arrival at MRRC; and

(h) Failing to conduct an interview based on the Plaintiff’s Intake Screening Form within 36 hours of arriving at Parklea.

32. As a result of the negligence of the Third Defendant, the Plaintiff received serious physical injuries and brain injuries.”

14. GEO settled the claim made by Mr Mace and in the present proceedings Vero admitted that the settlement was a reasonable one.

GEO’s cross-claim pleading

15. By GEO’s second further amended statement of cross-claim it pleaded, relevantly:

“12    For the purposes of this cross-claim only and without making any admissions whatsoever, GEO repeats as against Vero the contents of the plaintiff’s further amended statement of claim (plaintiff’s claim).

…

16   A Claim was subsequently made on GEO by the plaintiff on or about 8 March 2013.

Particulars

Service of the plaintiff’s statement of claim and ancillary documents under cover of a letter from PIAC dated 7 March 2013.”

16. Accordingly, the claim in the Supreme Court made by GEO against Vero was expressly limited to the claim made against GEO by Mr Mace.

The relevant terms of the Policy

17. Vero and GEO were parties to the Policy. The coverage clause was contained in Clause 7 of the Policy which provided:

“The insurer will indemnify the Insured against civil liability for compensation and claimant’s costs and expenses in respect of any Claim or Claims first made against the Insured and notified to the Insurer during the Period of Insurance resulting from the conduct of the Healthcare Services.”

18. The relevant issue before the primary judge was whether Mr Mace’s claim (which was accepted to be a “Claim” for the purposes of the Policy) was a claim “resulting from” GEO’s conduct of the “Healthcare Services”.

19. The definition of Healthcare Services in the Policy provided:

“Healthcare Services means the healthcare services described in the Schedule, and no other, of the Policyholder.”

20. The description of Healthcare Services in the Policy Schedule was as follows:

“Healthcare Services: The provision of medical services and treatment including services and treatment provided by psychologists and counsellors.”

The decision of the primary judge

21. The primary judge found that Mr Mace’s Corrective Services file, to which GEO had access in 2010, recorded that he had been in custody in 2008. During that period of incarceration, Mr Mace had committed a serious act of self-harm, requiring hospitalisation. He was then diagnosed and treated for schizophrenia.

22. GEO accepted that it owed a duty of care to Mr Mace to ensure that the psychologists and counsellors it employed at Parklea assessed Mr Mace at the time of his admission. That duty could have arisen from its assumption of responsibility evidenced either by its contractual obligation to the State or by the systems it had put in place for the management of inmates at Parklea. As already noted, in these proceedings Vero accepted that the settlement GEO reached with Mr Mace was a reasonable one. Vero maintained, however, that the non-provision of counselling and psychological services by GEO to Mr Mace did not fall within the cover provided by the Policy.

23. The primary judge set out her conclusions regarding the coverage provided by the Policy at [25] – [27]:

“[25] The policy specifies that what is insured is not claims about the acts and omissions of those who provided the defined healthcare services, but rather claims made against Geo and notified to Vero which “result from the conduct” of the specified services. Consistent with the policy’s focus on claims arising from the conduct of those services, the proposal form which Vero devised sought information about those who might be involved in the conduct of those services. That was a wider group than the professionals who actually provided the specified services themselves.

[26] True it is that Mr Mace’s complaint was about Geo’s management of the operation of the Centre. That operation was not, however, confined to the provision of custodial services. Both by its contractual obligations and the systems it devised to meet those obligations, Geo had to provide inmates the professional services of psychologists and counsellors. Their services were provided, amongst other things, in order to identify and manage inmates who were at risk of self-harm while in custody at the Centre, in order that Geo could meet both its contractual obligations and its duty of care to inmates.

[27] Mr Mace claimed that he was such a person and that Geo had negligently failed to provide him with those services, as it ought to have done. That, I am satisfied, is a claim resulting from Geo’s conduct of the Healthcare Services the subject of the policy.”

24. The primary judge noted that her conclusion was “supported by the documents which govern GEO’s contractual obligations to provide those services to inmates at Parklea and the evidence as to the systems it put in place, in order to satisfy those obligations”.

Contractual obligations

25. GEO’s contractual obligations were contained in an agreement with the State, as represented by the Commissioner for Corrective Services. Relevantly, the agreement obliged GEO to perform the services identified in GEO’s Tender Response in accordance with the operating specifications contained in the agreement.

26. Clause 15 of the agreement provided that GEO was obliged to facilitate the provision of “Health Services” by Justice Health. Clause 15(d) acknowledged that both the Commissioner and GEO were party to a Health Services (Tripartite) Deed, which “may vary the terms of this Agreement in relation to the conduct of the Health Services”.

27. GEO’s Tender Response specifically addressed the risk of self-harm for inmates, and the strategies, policies and procedures it would put in place for dealing with inmates with mental health issues. The Tripartite Deed dealt with the facilitation of “Health Services” which GEO agreed that Justice Health would provide. The primary judge found:

“[44] What may not be overlooked, in resolving what here lies in issue, is that this Schedule expressly excluded in clause 8, from the services Justice Health was to provide, psychological services, drug or alcohol counselling and any other service Geo was engaged to provide under the operating agreement. As to mental health, Schedule 1 to the deed also provided that Justice Health will ‘(a) assist the Operator in the management of Inmates who are at risk of self-harm or suicide, including referral for ongoing treatment services’.”

28. The operating specifications in the Tripartite Deed expressly obliged GEO to assess the needs of inmates at risk of deliberate self-harm and those with mental illness. The primary judge concluded:

“[56] In the result, it is apparent that what was finally agreed between the Commissioner and Geo required it to assess, identify and manage inmates at risk of self-harm in custody when they entered Parklea. On the evidence it employed psychologists and counsellors to meet those obligations.”

GEO’s systems in operation at Parklea

29. The primary judge heard evidence from Mr Jones, a correctional manager, and Ms Azzopardi, a psychologist, regarding the operation of GEO’s reception system at the time Mr Mace was transferred to Parklea.

30. Ms Azzopardi’s duties at that time included “assessment of inmates who are considered to be at-risk of suicide or self-harm and develop appropriate strategies for their management”. Ms Azzopardi gave evidence that at the time of Mr Mace’s transfer to Parklea, all inmates transferring into Parklea went through “a reception and induction process carried out by GEO staff…”.

31. Mr Jones gave evidence that the standard “Incoming Escort Checklist” was completed for Mr Mace. He also gave evidence that the computer database that held inmate information included an alert/comment that:

“12. The review of all inmates at the time of reception at Parklea CC was conducted by a GEO psychologist and/or counsellor. A corrective services officer would also be in attendance. The review was usually carried out on an inmate's second day at Parklea CC and after they had seen a nurse employed by the first defendant (Justice Health). At the review, the psychologist or counsellor would ask each new inmate standard questions, including (not being an exhaustive list): if they had any mental health issues, if they considered themselves to be at risk of self-harm, and if they were on any medication. At the review, the GEO staff were required to form and did form an opinion as to whether protective custody was appropriate for the inmate, if the inmate was a risk to others or themselves, and if the inmate required psychological treatment, counselling, or referral to a Justice Health doctor.”

32. Mr Jones said that the system was that on arrival, the Incoming Escort Checklist would be used by staff in reception, to ensure that the inmate was placed in the correct area. Mr Jones explained that inmates identified to be at risk of serious mental illness or self-harm were referred to GEO psychologists and Justice Health staff. Alerts for medications such as methadone were also recorded and passed on to Justice Health, but not all medications were noted. Health assessments were conducted by Justice Health on the first day of arrival and GEO’s psychologists and counsellors were instructed to review all inmates the following day. Each inmate also had a separate case management team.

33. The primary judge noted that, “There was no evidence of a record evidencing that Mr Mace had been assessed, as GEO was obliged to assess him, when he entered the centre for risks of self-harm as a result of his mental illness”.

Conclusion of the primary judge

34. The primary judge concluded that GEO’s claim was covered by the Policy:

“[73] Geo obtained insurance cover from Vero, for claims resulting from the conduct of the Healthcare Services specified in the insurance policy, namely the “provision of medical services and treatment including services and treatment provided by psychologists and counsellors”. Those services involved inmate assessment. The policy extended to claims concerning both acts and omissions in the conduct of those services and treatments.”

35. The primary judge emphasised that the insuring clause addressed claims “resulting from the conduct” of the Health Services. This obligation went beyond the provision of services by a particular psychologist or counsellor to a particular inmate during an in-person consultation. It included claims which resulted from how GEO conducted the provision of such services, including their non-provision.

36. The primary judge found that Mr Mace’s claims against GEO (which GEO pleaded back against Vero in the cross-claim) included a complaint of failure to undertake psychological assessment or to provide him with any Healthcare Services. That was a claim “resulting from” its “conduct” of the insured “Healthcare Services”. The primary judge concluded:

“[77] …It follows that what was insured involved more than what occurred during the provision of the services of a particular psychologist or counsellor to a particular inmate. It included claims which resulted from how Geo conducted the provision of such services, in Mr Mace’s case, by failing to provide him with the services of its psychologists.

[78] The insured services were conducted by Geo in order that the risks which inmates posed at the Centre were assessed by the psychologists it employed on the inmate’s arrival, so that they could be managed in appropriate ways, including by the provision of further services to the inmate by its psychologists and counsellors. The services were so conducted in order that Geo could address the risks in respect of which Geo owed inmates a duty of care and in order to meet its contractual obligations. Mr Mace’s claims against Geo were concerned with its failure to undertake such an assessment and to provide him with such further services. That was a claim “resulting from” its “conduct” of the insured “Healthcare Services”.”

Grounds of appeal and notice of contention

37. Vero’s notice of appeal comprised three grounds of appeal:

“1.    The trial judge erred in law in concluding that the respondent was entitled to be indemnified by the appellant under the policy in respect of the claim of the plaintiff (Mr Mace).

2.    The trial judge erred in concluding that the claim of Mr Mace against the respondent was within the insuring clause of the policy issued by the appellant and the trial judge should have found, having regard to the description of “Healthcare services” in the Schedule and the definition of “Healthcare Services” in the policy, that the claim of Mr Mace was not within the insuring clause as properly interpreted.

3.    In light of the primary findings of fact made by the trial judge at J8, J26 (first sentence), J27 (first sentence) and to a lesser extent J70, the trial judge erred in reaching the conclusions in J27 (second sentence) and J77 (final two sentences) and J78 (final sentence).”

38. Although in oral submissions Senior Counsel for GEO, Mr Cheshire SC, with whom Mr Newton appeared, submitted that the primary judge had made findings that GEO had in place a system whereby each inmate was subject to a psychological and mental health assessment by a GEO employee, for more abundant caution a notice of contention was filed in the following terms:

“The primary judge ought to have found that as at the time of the plaintiff’s admission to Parklea Correctional Centre on 3 March 2010 and injury on 7 March 2010, the respondent had in place a system whereby each inmate was subject, on the day following the admission, to a psychological and mental health assessment by a psychologist and/or counsellor employed by the respondent.”

Vero’s submissions

39. Ground three of Vero’s notice of appeal emphasised the following findings of fact made by the primary judge and her Honour’s characterisation of Mr Mace’s claim (which was the only claim made by GEO against Vero):

1. there was no evidence that during the time that Mr Mace was on remand at Parklea from 3 to 7 March, he received any services from either the psychologists or the counsellors employed by GEO. Properly understood, his complaint was that he should have received such services, both on admission and subsequently, as it was only by providing such services that GEO identified inmates who were at risk of self-harm and took steps to manage that risk;

2. Mr Mace’s complaint, properly understood, was about GEO’s management of the operation of the Centre;

3. Mr Mace claimed that he was [a person at risk of self-harm while in custody] and that GEO had negligently failed to provide him with the services of psychologists and counsellors, as it ought to have done; and

4. there was no evidence that Mr Mace had been assessed, as GEO was obliged to assess him, when he entered the centre for risks of self-harm and as a result of his mental illness.

40. Given those findings of fact, it was submitted that the primary judge erred in reaching the conclusions that:

“[27]    … I am satisfied, is a claim resulting from Geo’s conduct of the Healthcare Services the subject of the policy.

…

[77]    …It follows that what was insured involved more than what occurred during the provision of the services of a particular psychologist or counsellor to a particular inmate. It included claims which resulted from how Geo conducted the provision of such services, in Mr Mace’s case, by failing to provide him with the services of its psychologists.

[78]    …That was a claim “resulting from” its “conduct” of the insured “Healthcare Services”.”

41. Vero submitted that the proper characterisation of Mr Mace’s claim against GEO was that:

“GEO failed to provide him with medical services or treatment. Specifically [Mr Mace’s claim] arose because GEO did not provide Mr Mace with any services or treatment by the psychologists or counsellors of GEO.”

42. Vero submitted that the claim, so characterised, was not within the scope of the insuring clause.

43. Vero submitted that whether Mr Mace should, or ought to have received the services of GEO’s psychologists or counsellors, said to be in issue by the primary judge, did not arise, because the evidence at the trial could not alter the nature of the claim earlier made by Mr Mace and settled by GEO, which was expressly limited to the non-provision of any services. It was that claim, and only that claim, which was repeated by GEO against Vero.

44. Vero emphasised that this matter arose in the context of a policy which provided cover for part only of a wider business conducted by GEO at Parklea. Vero emphasised the definition of Healthcare Services which, it will be recalled was:

“Healthcare Services means the healthcare services described in the Schedule, and no other, of the Policyholder.” (italics added)

45. It was submitted that this definition, which was emphatic in its limitation of the Healthcare Services covered by the Policy (“and no other”), was determinative in favour of Vero. This was because the claim, properly construed, was about the lack of coordination by GEO of the running of the prison at the point of admission of remand prisoners. GEO’s claim should thus be characterised as relating to GEO’s provision of custodial services, which was outside the scope of coverage under the Policy, which was limited to the provision of medical services and treatment, including services and treatment provided by psychologists and counsellors, “and no other”.

46. Vero contended that GEO’s submissions sought to move away from what was pleaded below. It was submitted that GEO sought a “finding that medical employees of GEO in fact attended Mr Mace and that his loss arose out of their negligence”, however, that was not what Mr Mace claimed.

47. Vero submitted that:

“GEO pleaded the existence of a claim under the Policy solely by reference to Mr Mace’s pleaded claim. Mr Mace’s pleaded claim alleged that GEO failed to provide him with access to Healthcare Services. Mr Mace did not allege that Healthcare Services were (negligently) provided by GEO. After settling Mr Mace’s claim and without even seeking to amend its pleading to alter what it alleged was the claim, GEO attempts to assert facts to put a different character on the claim. GEO now wants to say that as a matter of fact Mr Mace’s claim was for negligent provision of Healthcare Services by medical personnel who actually assessed him.”

48. Vero submitted that the contractual obligations of GEO to the State, while useful in providing context, did not form part of Mr Mace’s claim, and could not be used in interpreting the Policy.

GEO’s submissions

49. GEO submitted that Mr Mace’s case, which was repeated by GEO against Vero, was that if appropriate steps were taken by GEO’s psychologists and counsellors to manage Mr Mace’s identifiable risk of self-harm, he would not have suffered the loss and damage which he did.

50. GEO submitted that the question of whether Mr Mace ought to have received psychological services went directly to the issue of whether Mr Mace’s claim “resulted from” the “conduct” by GEO of Healthcare Services, as defined. It was submitted that the “conduct” by GEO of Healthcare Services included the omission to provide such services in accordance with the system for the provision of Healthcare Services GEO had established.

51. GEO emphasised that it was contractually obliged to provide inmates at Parklea with services of psychologists and counsellors. GEO’s failure to identify an inmate at risk of self-harm was an omission in the conduct of the Healthcare Services which GEO was providing.

Relevant principles

52. There was no dispute about the content of the relevant principles to be applied in construing GEO’s obligations under the Policy. Rather, the dispute was about the proper characterisation of GEO’s claim against Vero and the application of the relevant principles to the claim correctly characterised.

53. In Vero Insurance Ltd v Australian Prestressing Services Pty Ltd [2013] NSWCA 181, Meagher JA (with whom Beazley P and Simpson JA agreed) summarised the relevant principles:

“[40] The language of a particular provision in a contract of insurance must be construed having regard to its other terms, the commercial circumstances which it addresses and the objects which the parties can be presumed to have intended to secure by making their contract: McCann v Switzerland Insurance Australia Ltd [2000] HCA 65; 203 CLR 579 at [22]; Wilkie v Gordian Runoff Ltd [2005] HCA 17; 221 CLR 522 at [15]. Words used in a contract which have an ordinary or literal meaning will usually be given that meaning unless consideration of the text and context provide a principled basis for adopting some other meaning. For example, words will not be given their ordinary or literal meaning if they have another specialised meaning and, by reference to the text and admissible evidence of surrounding circumstances, reasonable persons in the position of the parties would be presumed to have intended that the words have that specialised meaning: Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; 149 CLR 337 at 350-352; Holt & Co v Collyer (1881) 16 Ch D 718 at 720.”

Consideration

54. I have concluded that on a proper characterisation of GEO’s claim against Vero, and on the facts found by the primary judge which have not been challenged, GEO’s claim was one resulting from its conduct of Healthcare Services, as defined.

55. The language of the coverage provision of the Policy, in the context of the other terms of that contract, favours the conclusion that the pleaded claim by Mr Mace against GEO, which pleading was repeated by GEO against Vero, was a claim “resulting from the conduct of the Healthcare Services”, as those terms are further defined in the Policy.

56. An objective observer would conclude that the parties intended that the “conduct” of the Healthcare Services included an omission by GEO to provide Healthcare Services. Mr Marshall SC, who appeared with Ms Horvath on behalf of Vero, accepted that proposition, at least in part. He drew a distinction between the non-provision of services simpliciter and the non-provision of particular services as part of the overall provision of medical services and treatment:

“…the policy could theoretically cover omissions - not theoretically, practically, because when you're providing a service, you could provide a half-baked service, and miss something.

But within the same concept, if you don't even have doctors at your facility, and someone gets the flu because they should have been given a flu shot, the policy doesn't insure against that, because there isn't a doctor relevantly providing any service.

…

[A]ctual provision of services…we insure that, the act and the omission part of the provision of it. What happened here we say is fundamentally different. The plaintiff says… I never got anything… that’s not the conduct of the provision of Healthcare Services.” (emphasis added)

57. The conclusion that an omission to provide services fell within the definition of Healthcare Services in the Policy is supported by the other terms of the contract. The Policy included an “Aggregation of Claims and Fidelity Claims” clause which included the provision that “[a]ll claims arising out of, based upon, attributable to or in respect of a single act, error or omission or series of acts, errors or omissions consequent upon or attributable to one source or original cause shall be considered to be a single Claim and shall attract one Excess”. That clause, in identifying the circumstances of permissible aggregation under the Policy as extending to Claims in respect of an “omission” or “series of omissions”, provides support for a construction which identifies an omission to provide Healthcare Services as within the objective contemplation of the parties as being the “conduct” of Healthcare Services.

58. It is correct, as Vero submitted, that the coverage it agreed to provide was subject to important limitations provided in the definition of Healthcare Services which in turn was limited to the Healthcare Services described in the Policy Schedule, and no other, of the Policyholder. Mr Marshall SC submitted:

“The risk is arising from the provision of the healthcare services. If they're contractually obliged to do something and they don't put in place a system, or they don't have it in place, at the time of transition … that's not a risk that we're covering, we would say. We're covering the risk that arises from the provision of the healthcare services. They have a unit that's supposed to provide the services and if they do provide the services, that's what we're insuring against them doing wrongly. That's really our case, your Honours.”

59. Contrary to the submissions made by Vero, however, coverage under the Policy was not limited to services provided or omitted to be provided in a physical consultation by GEO’s psychologists and counsellors with an inmate, but, in terms, encompassed "the provision of medical services and treatment”, including services and treatment provided by psychologists and counsellors.

60. I accept Vero’s submission that the Policy should not be construed as providing coverage for GEO’s conduct in the provision of custodial services. If, on an analysis of GEO’s claim against Vero, it was correct to conclude that the claim should be understood as being that the custodial services provided by GEO caused Mr Mace to suffer loss and damage, that claim would not be within the coverage provided by the Policy.

61. On the correct characterisation of this claim, however, GEO’s claim was a result of the conduct of the Healthcare Services; it arose directly from the faulty operation of the system GEO had devised and implemented to address the risks to the mental health of inmates, including Mr Mace.

62. Contrary to Vero’s submission, each of the particulars of GEO’s negligence referred to in paragraph [13*] above (including (d), (e) and (h) relied upon in particular by Vero), with the possible exception of particular (a), meets the description of a claim resulting from the conduct of the Healthcare Services.

63. GEO’s pleaded case was correctly understood by the primary judge as including a claim that the omission to provide Healthcare Services to Mr Mace arose from a failure of GEO’s healthcare systems, and was not simply a claim that GEO did not conduct Healthcare Services at all. The pleaded claim was directed to the non-provision of particular services to Mr Mace, being an assessment by a counsellor or psychologist, as part of the overall provision of medical services and treatment by GEO to inmates.

59. Vero's case was that GEO's failure to have either a psychologist or counsellor assess Mr Mace upon his admission was not something which occurred in the conduct of Healthcare Services, as defined. This was because the omission to provide services did not occur in the course of a psychologist or counsellor physically providing a service to Mr Mace. The primary judge was correct to reject that submission. The insuring clause was broad enough to provide cover to GEO in circumstances where, by reason of a failure of GEO’s healthcare systems to identify Mr Mace as requiring assistance, he suffered loss or damage. This is because that omission, properly characterised, was a result of the conduct by GEO of Healthcare Services, namely the omission as part of the Healthcare Services GEO was otherwise providing to inmates at Parklea to identify Mr Mace’s risk of self-harm.

60. Properly construed, the conduct of Healthcare Services by GEO involved more than acts and omissions of a particular counsellor or psychologist in the course of a consultation with a particular inmate. The “conduct” of Healthcare Services extended to acts and omissions in identifying and assessing inmates for the purpose of determining which further health services and treatments were required. This conclusion is sufficient to identify GEO’s claim in this case as one resulting from the conduct of Healthcare Services.

61. Her Honour’s factual findings that GEO provided Healthcare Services at Parklea were amply supported. Those services were provided in order to identify and manage inmates who were at risk of self-harm while in custody at Parklea. The only findings challenged by Vero were the ultimate findings set out at [*40] above. While Vero relied upon a number of the primary judge’s findings to support its characterisation of the claim, those findings need to be read in context with the other findings of fact. The most important of those findings were as follows:

1. the findings regarding the nature of Mr Mace’s claim:

“There was no evidence that during the time that Mr Mace was on remand at Parklea from Wednesday, 3 to Sunday, 7 March, he received any services from either the psychologists or the counsellors employed by Geo. Properly understood, his complaint was that he should have received such services, both on admission and subsequently, it being thereby that Geo identified inmates who were at risk of self-harm and took steps to manage that risk”: [8]

2. the positive finding that GEO had put Healthcare Services systems in place:

“True it is that Mr Mace’s complaint was about Geo’s management of the operation of the Centre. That operation was not, however, confined to the provision of custodial services. Both by its contractual obligations and the systems it devised to meet those obligations, Geo had to provide inmates the professional services of psychologists and counsellors. Their services were provided, amongst other things, in order to identify and manage inmates who were at risk of self-harm while in custody at the Centre, in order that Geo could meet both its contractual obligations and its duty of care to inmates”: [26].

3. the finding that “Mr Mace claimed that he was [an inmate at risk of self-harm while in custody at the Parklea] … and that Geo had negligently failed to provide him with those services, as it ought to have done”: [27]

4. the finding made by the primary judge after her Honour's review of the various contractual documents, that:

“In the result, it is apparent that what was finally agreed between the Commissioner and Geo required it to assess, identify and manage inmates at risk of self-harm in custody when they entered Parklea. On the evidence it employed psychologists and counsellors to meet those obligations.” [56]; and

5. the specific findings about the procedures devised to provide the Healthcare Services GEO had contracted to provide at Parklea:

“It sought to address that duty, as well as the contractual obligations it later entered, by the procedures it devised. They involved firstly, assessment of inmates by the psychologists and counsellors it employed on entry to the Centre and subsequently, by management of any risks identified. Thereby Geo set out to meet both its duty of care and its contractual obligations to identify and manage the risks which the inmates posed, including the risk of self-harm.” [72]

“Geo obtained insurance cover from Vero, for claims resulting from the conduct of the Healthcare Services specified in the insurance policy, namely the “provision of medical services and treatment including services and treatment provided by psychologists and counsellors. Those services involved inmate assessment. The policy extended to claims concerning both acts and omissions in the conduct of those services and treatments.” [73]

67. Those findings demonstrated that at the time of Mr Mace’s admission, GEO was engaged in providing Healthcare Services to inmates at Parklea and that the failure to assess Mr Mace was an omission in the course of provision of Healthcare Services to inmates. The claim resulted from the conduct of Healthcare Services. Her Honour was correct so to conclude.

68. Having regard to these conclusions, it is unnecessary to address GEO’s notice of contention.

Conclusion and orders

69. For the foregoing reasons I propose the following orders:

1. Appeal dismissed;

2. Appellant to pay the respondents costs as agreed or assessed.

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Decision last updated: 25 May 2017