Insurance Commission of Western Australia v Kightly
[2004] WADC 5
•30 January 2004
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL
LOCATION: PERTH
CITATION: INSURANCE COMMISSION OF WESTERN AUSTRALIA -v- KIGHTLY [2004] WADC 5
CORAM: MARTINO DCJ
HEARD: 28 NOVEMBER 2003
DELIVERED : 30 JANUARY 2004
FILE NO/S: CIV 1894 of 2002
BETWEEN: INSURANCE COMMISSION OF WESTERN AUSTRALIA
Plaintiff
AND
PAUL KIGHTLY
Defendant
Catchwords:
Insurance - Subrogation - Personal accident policy - Whether insurer entitled to recover from insured benefits paid where the insured compromises claim against third party
Legislation:
Nil
Result:
Plaintiff's claim dismissed
Representation:
Counsel:
Plaintiff: Mr D Wallace
Defendant: Mr R J L McCormack
Solicitors:
Plaintiff: Downings Legal
Defendant: Bradley & Bayly
Case(s) referred to in judgment(s):
BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 52 ALJR 20
Glynn v Scottish Union & National Insurance Co Ltd (1963) 40 DLR (2d) 929
Medical Defence Union Ltd v Department of Trade [1980] Ch 82
Orion Insurance Co Ltd v Hicks (1972) 32 DLR (3d) 256
The National Insurance Co of New Zealand Ltd v Espagne (1961) 105 CLR 569
Case(s) also cited:
Australian Casualty Co v Federico (1986) 160 CLR 513
Blundell v Musgrave (1956) 96 CLR 73
Bradburn v Great Western Railway Co (1874) LR 10 Exch 1
Castellain v Preston (1883) 11 QBD 380
Container Handlers Pty Ltd v Insurance Commission of Western Australia (2001) 25 WAR 42
Legal and General Insurance Australia Ltd v Eather (1986) 6 NSWLR 390
McCamley v Cammell Laird Shipbuilders Ltd v Insurance Commission of Western Australia [1990] 1 All ER 854
McDonald v Moore [2003] WASCA 21
Napier v Hunter [1993] AC 713
Thiess Contractors Pty Ltd v Norcon Pty Ltd [2001] WASCA 364
Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107
Victims Compensation Fund Corporation v Brown (2003) 201 ALR 260
Wollington v State Electricity Commission (Vic) (No 2) [1980] VR 91
Woodside Petroleum Development Pty Ltd v H & R E & W Pty Ltd (1997) 18 WAR 539
MARTINO DCJ:
Introduction
The plaintiff ("ICWA") claims from the defendant ("Mr Kightly") the repayment of the sum of $70,557.30 it paid to Mr Kightly under an insurance policy. Mr Kightly admits receiving that sum but denies liability to repay it. The trial of the action took place on the basis of two minutes of agreed facts. Annexed to the first minute of agreed facts was a copy of an insurance policy, a consent judgment in Mr Kightly's favour against Surf Lifesaving Western Australia Incorporated ("Surf Lifesaving WA") and a Deed of Release between Mr Kightly and Surf Lifesaving WA. No oral evidence was called.
The agreed facts
In May 1998 Mr Kightly was a "volunteer sea rescue member". On 30 May 1998 Mr Kightly undertook a training course conducted by Surf Lifesaving WA. While engaged in that training course Mr Kightly's right leg was injured.
Paragraphs 4 and 5 of the first minute of agreed facts are in the following terms:
"4.At all material times there was a contract of personal accident insurance between [ICWA] and the Denmark Volunteer Sea Rescue Group (WA Police Service).
5.[ICWA] paid benefits to [Mr Kightly] pursuant to a personal accident policy of insurance issued by [ICWA] ("the policy"), totalling $70,557.30, broken down as follows:
Clause 1.4, Item 46 Medical expenses $8,714.40
Clause 1.4, Item 45 Rehabilitation expenses $1,986.60
Clause 1.4, Item 47 Travel expenses $5,070.70
Clause 1.4, Item 48 Loss of income $54,785.60
Total$70,557.30"
By his defence Mr Kightly admits that the payments made to him were for expense and loss incurred as a result of the injury suffered on 30 May 1998 while engaged in the training course.
Mr Kightly brought an action in this Court against Surf Lifesaving WA in respect of the injury suffered on 30 May 1998. On or about 21 February 2002 Mr Kightly entered into a Deed of Release, Discharge and Indemnity with Surf Lifesaving WA and on 25 February 2002 consent judgment was entered in Mr Kightly's favour in his action against Surf Lifesaving WA for $145,000 plus costs of $35,000. The judgment sum and costs were paid to Mr Kightly on or about 25 February 2002.
The payments made to Mr Kightly by ICWA were all made before Mr Kightly's settlement with Surf Lifesaving WA and before the payment of any monies to Mr Kightly pursuant to that settlement.
The policy
The policy begins with the following heading:
SPECIAL COVER - PERSONAL ACCIDENT
(VOLUNTEER SEA SEARCH & RESCUE)
The policy wording refers throughout to RiskCover[M1]. Although RiskCover was not referred to in the minutes of agreed facts or defined in the policy wording it seems clear from the context in which the name is used that it refers to ICWA.
The policy wording refers to a Volunteer. That word is defined as including a person who volunteers his or her services to the Public Authority whilst engaged in a variety of activities including sea search and rescue operations and training activities. Public Authority is not defined, but again in context of the policy and the minute of agreed facts to which it is annexed it seems clear that the Denmark Volunteer Sea Rescue Group (WA Police Service) is a Public Authority within the meaning of those words in the policy.
Clause 1.2 (a) of the policy provides:
"RiskCover will pay to or on behalf of the Public Authority the Compensation stated in clause 1.4 if any of the Events set out in clause 1.4 shall happen to the Volunteer resulting from an Injury."
Injury is defined in clause 1.1(a) as follows:
"Injury means bodily injury which:
(i)is sustained by the Volunteer during the Period of Cover;
(ii)is caused by an accident; and
(iii)directly and independently of any other cause, except illness directly resulting from or medical or surgical treatment rendered necessary by such bodily injury, results in any of the Events set out in clause 1.4 within 12 calendar months from the date of the accident by which such bodily injury is caused."
Clause 1.3 provides:
"Subject to clauses 1.4 and 1.5, Coverage shall be limited to the Capital Sum of $250,000 in respect of any one Injury to any one Volunteer."
Clause 1.4 provides:
"The following Compensation is payable to each Volunteer".
There then follows a table containing 49 matters. They include death, losses of function such as loss of sight, injuries such as loss of an arm, expenses such as vocational rehabilitation expenses and disablement.
For the majority of the matters in the table the compensation payable is a percentage of the Capital Sum. For death 100 per cent is payable and for loss of sight in one eye 50 per cent is payable. The matters in the table include items which have no apparent relationship to income earning capacity, such as loss of genitals and scarring.
The matters in cl 1.4 for which payment was made to Mr Kightly are numbered 45, 46, 47 and 48. In respect of those items the clause provides as follows:
"The Event
Percentage of the Capital Sum of the Amount Specified
…
45Vocational Rehabilitation Expenses 7
46Medical Expenses 30
Provided that if the Public Authority or the Volunteer becomes entitled to a refund of all or part of such Medical Expenses from any other source including any Private Health Fund or Commonwealth Government Medicare Scheme, Riskcover will only pay the excess of the amount recoverable from such other source.
47Travel Expenses $2,000
48Temporary Total Disablement necessarily and continuously disables the Volunteer from attending to business or occupation (of any and every kind) or if he/she has no business or occupation necessarily confines him/her immediately and continuously to the house and prevents him/her from attending to any of his/her duties (if any).
Weekly payments
(i)EMPLOYED (INCLUDING SELF EMPLOYED)
at a weekly amount up to one percent of the Capital Sum but not exceeding in any case the normal weekly remuneration of the Volunteer at the time of the Injury.
(ii)PERSONS ENGAGED IN HOME DUTIES
a weekly amount up to $500 for a Housekeeper/Housemaid, provided that:
(a)the Volunteer is ordinarily engaged in home duties and is now unable to perform those duties;
(b)medical evidence of the incapacity and the need to engage a Housekeeper/Housemaid is supplied to and approved by RiskCover;
(c)the Housekeeper/Housemaid is actually engaged in home duties.
PROVISOS TO (i) and (ii) above
(a) such weekly payments to be made so long as the disablement continues but not exceeding an aggregate of 104 weeks for any single disablement;
(b)where the Volunteer is entitled to weekly payments under both No's (i) and (ii) above then the maximum amount payable shall be limited in total to the Average Weekly Earnings as set out in (i) above."
Vocational Rehabilitation Expenses, Medical Expenses and Travel Expenses are defined in the policy. With the exception of Vocational Rehabilitation Expenses they are defined to mean incurred expenses of that kind. The travel expenses paid to Mr Kightly by ICWA exceed the sum provided for in item 47. Neither party contended that the fact that ICWA apparently voluntarily paid more than it was obliged to do for travel expenses had any bearing on the outcome of ICWA's action.
Clause 1.5(f) of the policy provides:
"Any compensation payable under clause 1.4 shall be reduced by such amount as the Volunteer is entitled to receive or has received as compensation and/or damages under or from:
(i)the Motor Vehicle (Third Party Insurance) Act 1943 and/or the Workers' Compensation & Rehabilitation Act 1981;
(ii)any other source whatsoever in respect of the same Injury."
The statement of claim and the defence
By the statement of claim ICWA claims against Mr Kightly the return of the sum of $70,557.30. The claim is made on two bases: under the policy and under the law of subrogation. However the claim under the policy refers also to subrogation. The claim under the policy is in the following terms:
"8Pursuant to clause 1.5(f) of the Policy, compensation under the Policy was to be reduced by any amount that [Mr Kightly] received as compensation or damages from any other source in respect of the Injury.
9Further the Policy contained an implied term that [Mr Kightly] would pay to [ICWA] out of the monies received in reduction of his loss the amount that [ICWA] was entitled to receive by way of subrogation."
By its particulars of par 9 of the statement of claim ICWA claims that the term is to be implied because it is reasonable and equitable, gives business efficacy to the Policy, is so obvious it goes without saying, is capable of clear expression, does not contradict the express terms of the Policy and is in accord with the terms of the Policy.
ICWA claims that as Mr Kightly has received $145,000 in respect of the injury for which he obtained benefits under the policy the terms pleaded in pars 8 and 9 of the statement of claim cause the compensation payable under the Policy to be reduced to nil and that Mr Kightly is obliged to repay to ICWA the compensation he has received.
By the claim under the law of subrogation ICWA claims that it has indemnified Mr Kightly in respect of loss suffered by him by reason of the injury to the extent of $70,557.30. It claims that by reason of that indemnification it is entitled to receive the benefit of all rights and remedies Mr Kightly has or had against any person in respect of that loss, that Mr Kightly has exercised those rights and remedies to receive a payment from Surf Lifesaving WA and that he must therefore reimburse ICWA in respect of the payment ICWA made to him.
The statement of claim also refers to s 13 of the Insurance Contracts Act 1984. The plea was abandoned at trial.
In his defence Mr Kightly pleads that there was no contract between ICWA and Mr Kightly. That defence was abandoned at trial.
Mr Kightly pleads that the benefits paid to him under the policy were paid in accordance with the items and amounts specified in cl 1.4 of the policy and not otherwise and that the policy is not an indemnity policy.
Mr Kightly also pleads that the there is no obligation to repay the compensation he received from ICWA because the amount received by him from Surf Lifesaving WA did not include any compensation or award of damages in respect of any of the items for which he received compensation under the policy.
Conclusion as to ICWA's claim under Clause 1.5(f) of the policy
At the time of the payments made to him under the policy Mr Kightly had a claim that he either had made or could make against Surf Lifesaving WA. Whether or not the claim was a valid cause of action has not been determined by a court by reason of the compromise. The compromise shows that the parties believed that there was some merit to the claim.
When Mr Kightly received the monies paid to him under the policy by ICWA he had not received and was not entitled to receive any amount from Surf Lifesaving WA in respect of his injury. All he had was a cause of action in damages. That cause of action was not an entitlement to receive an amount of money. "A common law action for damages for personal injury …is not a claim to have a pecuniary loss made good, but to have a pecuniary compensation for all the consequences of physical injury.": The National Insurance Co of New Zealand Ltd v Espagne (1961) 105 CLR 569 at 588.
I conclude that at the time that he received the monies from ICWA cl 1.5(f) of the policy did not preclude him from doing so.
Claim under implied term in the policy
As I have noted the term that ICWA claims to be implied in the policy is a term that Mr Kightly "would pay to [ICWA] out of the monies received in reduction of his loss the amount that [ICWA] was entitled to receive by way of subrogation". The claim under the implied term therefore relies upon ICWA being entitled to receive monies by way of subrogation. It follows that there is no scope for the term to be implied. If ICWA is entitled to receive monies by way of subrogation then the term is unnecessary. If it is not so entitled then the term has no operation. In either case it cannot be said that the term is necessary to give business efficacy to the policy: BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 52 ALJR 20 at 26.
Is the policy an indemnity policy?
ICWA's claim under the law of subrogation depends upon the policy being an indemnity policy "for accident policies are not contracts of indemnity and subrogation does not apply": The National Insurance Co of New Zealand Ltd v Espagne (supra).
"It appears that there are two categories of insurance which may respectively be called indemnity insurance and contingency insurance. Indemnity insurance provides an indemnity against loss, as in a fire policy or a marine policy on a vessel. Within the limits of the policy the measure of the loss is the measure of the payment. Contingency insurance provides no indemnity but instead a payment upon a contingent event, as in a life policy or a personal injury policy. The sum to be paid is not measured by the loss but is stated in the policy. The contractual sum is paid if the life ends or the limb is lost, irrespective of the value of the life or the limb.": Medical Defence Union Ltd v Department of Trade [1980] Ch 82 at 89.
There are a number of factors which point to the policy being a contingency policy rather than an indemnity policy. The policy is described as being a personal accident policy and a personal accident policy is often given as an example of a contingency policy in judgments and textbooks. The majority of the payments provided for in cl 1.4 of the policy are clearly in the nature of contingency payments as they are payments of a percentage of the capital sum in the event of the loss of function, injury or death.
Counsel for ICWA referred to two Canadian cases in support of his submission that, at least in respect of the items for which ICWA made payment to Mr Kightly, the policy is an indemnity policy. In Glynn v Scottish Union & National Insurance Co Ltd (1963) 40 DLR (2d) 929 the Ontario Court of Appeal held that a provision in a motor vehicle policy which provided for payment by the insurer of medical expenses incurred as a result of injury suffered in an motor vehicle accident was a provision for an indemnity, so that the insured could not recover under the policy for those expenses where the expenses had already been recovered in an action arising out of the accident against persons other than the insurer.
Orion Insurance Co Ltd v Hicks (1972) 32 DLR (3d) 256 also concerned a motor vehicle policy. The policy provided that if the insured was injured in a motor vehicle accident and was disabled the insured would receive a fixed weekly sum, provided that if the insured's loss was less than the fixed sum the insured would receive only the amount of the loss. A single judge of the Manitoba Court of Queen's Bench held that the cover provided an indemnity so that where the insured had recovered for loss of earning capacity from the negligent driver he was obliged to repay the benefits received to the insurer.
In my view both cases are distinguishable. Both policies were motor vehicle policies and provisions in policies are to be interpreted in the context of the policy as a whole. Although the reports do not include the whole of the policy considered in each cases motor vehicle policies are generally indemnity policies.
In this case the policy is an accident policy. It provides that a fixed percentage of the capital sum is to be paid to a volunteer where vocational expenses or medical expenses have been incurred and where disability has occurred and for a fixed sum to be paid where travel expenses have been incurred. While, in the case of medical expenses and travel expenses, the expense has to be incurred before the payment is to be made the payment is nevertheless a payment of the amount stated in the policy. Similarly in the event of temporary total disablement a fixed sum is to be paid to the volunteer for as long as the disablement continues up to a maximum period of 104 weeks. While in the case of an employed volunteer the payment cannot exceed the normal weekly remuneration of the volunteer it is nevertheless a payment upon a contingent event which, while it cannot exceed the loss, is not measured by that loss. I conclude that the policy is not an indemnity policy and that ICWA is not entitled to recover from Mr Kightly the payments it has made to him under the law of subrogation.
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