CGU Workers Compensation (NSW) Ltd v Garcia

CGU Workers Compensation (NSW) Ltd appealed to the Court of Appeal of New South Wales against a decision of the District Court. The dispute concerned the discontinuance of workers' compensation payments by CGU to Mr. Garcia. CGU had relied on two medical reports that were not favourable to Mr. Garcia's claim to cease payments, despite a number of other reports being favourable. The appeal concerned the interpretation of the relevant Workers' Compensation legislation and the conduct of the insurer in discontinuing payments.

The Court of Appeal was required to determine whether the insurer, CGU, had acted in breach of an implied term of good faith and reasonable conduct in its dealings with Mr. Garcia. A further issue was whether a tort of "good faith" existed in Australian law, and if so, whether it applied in the context of workers' compensation insurance schemes. The court also considered the proper interpretation of the *Workers Compensation Act 1987* and the *Workplace Injury Management and Workers Compensation Act 1998* in relation to the discontinuance of payments.

The Court of Appeal held that an implied term of good faith and reasonable conduct exists in contracts of insurance, including workers' compensation insurance. The court reasoned that the insurer's reliance on unfavourable medical reports to cease payments, without adequately considering or addressing the favourable reports, demonstrated a failure to act in good faith. The court rejected the existence of a standalone tort of good faith, finding that the existing contractual implied term was sufficient to address the conduct in question. The court found that CGU had breached its contractual obligations.

The appeal was allowed, and the decision of the District Court was set aside.