FAI Workers Compensation (NSW) Limited v MLC Insurance Limited; MLC Insurance Limited v FAI Traders Insurance Co. Limited

The case involved two applications for special leave to appeal to the High Court of Australia. The first application was by FAI Workers Compensation (NSW) Limited against MLC Insurance Limited, and the second was by MLC Insurance Limited against FAI Traders Insurance Co. Limited. The core dispute concerned the extent of an employer's obligation to take out workers' compensation insurance and the corresponding obligations of insurers under the Workers' Compensation Act 1926 (NSW) and the Workers' Compensation Act 1987 (NSW), as well as the validity of the prescribed policy issued under these Acts.

The High Court was required to determine the scope of an employer's statutory duty to insure against liability to workers. Specifically, the court needed to consider whether this duty extended to all liabilities arising from the employer-worker relationship, irrespective of how an employer might structure their insurance policies across different insurers or different aspects of their business. A related issue was whether the prescribed policy of insurance issued under the relevant legislation was intended to cover all such liabilities, or if insurers could limit their exposure through selective underwriting.

The submissions presented to the court, particularly by FAI Workers Compensation (NSW) Limited, argued that the legislative scheme mandated that an insurer's liability should directly mirror the employer's liability to the worker. This interpretation, drawing on reasoning from a previous judgment, posited that the Act requires employers to insure against their fundamental liability to workers, and insurers are bound to cover this liability. The argument suggested that insurers' practice of issuing selective policies for different business aspects might be contrary to the policy and intent of the legislation, which aims to ensure comprehensive coverage for all worker liabilities.

The applications for special leave to appeal were heard by Mason CJ, McHugh J, and other justices. The court's ultimate decision on the special leave applications and the subsequent substantive appeal would determine the precise extent of workers' compensation insurance obligations and the validity of policy limitations in light of the statutory framework.