Mario di Cecco v Mercantile Mutual Insurance (Workers Compensation) Ltd

[2002] NSWDDT 1

Reported Decision 23 NSWCCR 143

Dust Diseases Tribunal

of New South Wales

CITATION:	Mario di Cecco v Mercantile Mutual Insurance (Workers Compensation) Ltd [2002] NSWDDT 1
PARTIES:	Mario Di Cecco Mercantile Mutual Insurance (Workers Compensation) Ltd
MATTER NUMBER(S):	472 of 2001
JUDGMENT OF:	Curtis J at 1
CATCHWORDS:	Miscellaneous Matters :- s151AB s151AC s159 of the Workers Compensation Act 1987
LEGISLATION CITED:
CASES CITED:
DATES OF HEARING:	4th, 5th February 2002
DATE OF JUDGMENT:	02/21/2002
LEGAL REPRESENTATIVES:	FOR PLAINTIFF: Mr A Leslie QC instructed by Turner Freeman FOR DEFENDANT Mr I G Harrison SC with Mr J De Greenlaw instructed by McCulloch and Buggy

JUDGMENT:

1. The plaintiff Mario Di Cecco on 4 February 2002 recovered judgment in this Tribunal in the sum of $68,621.10 against his employer Auqual Pty Ltd (in liquidation) in respect of his occupational disease of silicosis. He presently claims, pursuant to s159(2)(b) of the Workers Compensation Act 1987, judgment in that sum against Mercantile Mutual Insurance (Workers Compensation) Ltd, (Mercantile) the insurer designated pursuant to s151AC of the Workers Compensation Act 1987 to respond to the employer’s liability. By agreement evidence in the primary action is evidence in these proceedings.

2. The plaintiff was employed by Auqual between 1968 and 31 March 1973. Associated National Insurance Company Ltd, to whose liabilities Mercantile has succeeded, was the workers’ compensation insurer of Auqual from 30 June 1968 to 30 June 1972. National Employers Mutual General Insurance Association Ltd (NEM) was the insurer between 30 June 1972 and 30 June 1973 and, as the last insurer on risk, liable pursuant to the terms of s151AB of the Workers Compensation Act 1987 to indemnify Auqual or pay to the plaintiff “the full amount of his damages”.

3. At issue between the plaintiff and Mercantile is the assertion by Mercantile that neither Mercantile as designated insurer nor NEM as the last insurer on risk may be ordered to pay to the plaintiff a sum greater than $50,000. In 1972 when NEM issued the relevant policy to Auqual, s18(1) of the Workers Compensation Act 1926 compelled employers to maintain a policy for common law liability “of at least $50,000”.

4. Mercantile also faintly argued that s151AC did not subject the designated insurer to any obligation arising pursuant to the combined effect of s151AB and s159(2)(a) to satisfy a judgment obtained by a plaintiff against his employer. I regard that argument as without substance.

PLEADINGS AND FINDING OF FACT

5. The plaintiff’s present action is pleaded in pars 4 and 5 of his statement of claim in these terms.

Par 4: The employer is liable for provisional damages for an occupational disease contracted by the worker.

Par 5: The [defendant] is the designated insurer liable to indemnify the employer for the full amount of damages and is liable to pay the full amount of damages to the worker.

6. The defence by Mercantile Mutual merely denies these allegations. It does not specifically plead the fact that NEM was the insurer liable pursuant to s151AB nor that the policy issued by NEM to Auqual was limited to a cover of $50,000.

7. It is true that the defence filed by Auqual to the plaintiff’s primary action recited in par 11 “The defendant says that it is only entitled to an insurance indemnity of $50,000 from the relevant workers compensation insurer”. However, such an allegation of fact was of course irrelevant to the issues raised by the plaintiff’s action against Auqual.

8. When the pleading discrepancy was raised in discussion after this trial commenced, Mr Harrison for Mercantile said:

If necessary I will amend the defence in these proceedings to incorporate the paragraph in the principal proceedings defence.

9. Mr Leslie for the plaintiff then said:

I submit that before they are given leave to do that they should produce the policy.

10. In the event no application for amendment was made. After I observed that a failure to amend pleadings is not fatal to the assertion of a legal right if the facts necessary to found such a right emerge and are contested at the trial, Mr Harrison referred me to the only evidence led until that point in time relevant to the issue. This was a letter tendered without objection as DX1 in the primary proceedings, it having been agreed that evidence in that trial was evidence in this. DX1 is a letter from Messrs Hunt and Hunt solicitors, to the solicitors for Mercantile in these terms.

Dear Sir,

Auqual Pty Ltd - Mario Di Cecco.

We refer to your letter dated 26 July 2001.

We are instructed to advise that the insurer’s guarantee fund - National Employers Mutual General Insurance Association (in liquidation) was on risk with Quality Earths Pty Ltd [the previous name for Auqual] for the period 30 June 1972 to 30 June 1973. We are instructed that our client has no information in its possession to indicate that its policy was renewed beyond 30 June 1973.

We confirm the advice contained in our letter of 25 July 2001 that only the statutory level of cover of $50,000 was available under our client’s policy.

11. The following exchange then occurred between the Bench and the Bar Table.

His Honour: It went in without objection. Can we have better evidence overnight?

Mr Harrison: I do not know the answer to that, your Honour. Could I make some inquiries?

His Honour: I would be loath be impose a $50,000 limit upon the hearsay assertion of a solicitor not involved in the trial.

Mr Harrison: I understand that, your Honour, yes.

12. DX1 is not only hearsay it is patently self serving, although no doubt written honourably to the best of the author’s information and belief.

13. No policy has been produced. No further evidence has been led. I infer that the advice contained in the letter of 25 July 2001 from Hunt and Hunt to McCulloch and Buggy referred to in DX1, which letter is not produced, was founded upon assumptions incapable of proof by admissible evidence. Mercantile bears the onus of establishing the relevant policy was limited in its cover. Relevant to the discharge of that onus is the following passage of the judgment of Hodgson JA in Ho v Powell ((2001) 51 NSWLR 572 at 576).

There is a longstanding controversy whether the civil standard of proof requires a numerical probability in excess of 50 per cent or belief amounting to reasonable satisfaction. My own opinion is that the resolution of the controversy involves recognition that, in deciding facts according to the civil standard of proof, the Court is dealing with two questions: not just what are the probabilities on the limited material which the Court has, but also whether that limited material is an appropriate basis on which to reach a reasonable decision. ...

In considering the second question, it is important to have regard to the ability of the parties, particularly parties bearing the onus of proof, to lead evidence on a particular matter, and the extent to which they have in fact done so. As stated by Lord Mansfield in Blatch v Archer (1774) 1 Cowp 63 at 65; 98 ER 969 at 970:...[A] ll evidence is to be weighed according to the proof which it was in the power of one side to have produced and in the power of the other to have contradicted.

14. In the instant case Mercantile is an insurance company which has traded under various corporate personalities for many years and may be presumed to know underwriters employed in the industry in 1972. Mercantile is in correspondence with NEM whose solicitors have received at least some information from their client relevant to the policy. If, perhaps understandably, the policy cannot be produced and there is no other evidence led by Mercantile such as evidence of underwriting policy, to suppose that NEM issued a limited policy is to engage in a speculation. I believe that no one knows whether the policy issued by NEM to Auqual was limited to the statutory minimum or not.

15. It was not necessary in the circumstances for Mercantile to amend its defence to assert the limitation of cover, however, I cannot find myself actually persuaded on the scant evidence of DX1 that the policy issued by NEM to Auqual was limited in its indemnity to the sum of $50,000.

16. If that conclusion were not open to me I am nevertheless persuaded that the plaintiff must succeed against Mercantile in the full sum of his judgment, because, unlike the provisions of s6(4) of the Law Reform (Miscellaneous Provisions) Act 1946, s159 of the Workers Compensation Act 1987 neither in its terms nor upon judicial exegesis may be read as limiting the rights there conferred against an insurer to the limit of indemnity provided in any particular policy.

FOUNDATIONS OF PLAINTIFF’S ACTION

17. The plaintiff’s claim against Mercantile may have been founded on each of two alternative statutory causes of action.

S 6 of the Law Reform (Miscellaneous Provisions) Act 1946

18. This section provides relevantly as follows:

S6(1):
If any person (hereinafter in this part referred to as the insured) has, whether before or after the commencement of this Act, entered into a contract of insurance by which the person is indemnified against liability to pay any damages or compensation, the amount of a person’s liability shall on the happening of the event giving rise to the claim for damages or compensation, and notwithstanding that the amount of such liability may not then have been determined, be a charge on all insurance moneys that are or may become payable in respect of that liability.
S 6(4):
Every such charge as aforesaid shall be enforceable by way of action against the insurer in the same way and in the same court as if the action were an action to recover damages or compensation from the insured; and in respect of any such action and of the judgment given therein the parties shall, to the extent of the charge, have the same rights and liabilities, and the Court shall have the same powers, as if the action were against the insured:

Provided that, except where the provisions of (2) apply no such action shall be commenced in any court except with the leave of the Court. Leave shall not be granted in any case where the Court is satisfied that the insurer is entitled under the terms of the contract of insurance to disclaim liability, and that any proceedings, including arbitration proceedings, necessary to establish that the insurer is so entitled to disclaim, have been taken.

S 6(7):
No insurer shall be liable under this part for any greater sum than that fixed by the contract of insurance between the insurer and the insured.
S 6(8):
Nothing in this section shall affect the operation of any of the provisions of the Workers Compensation Act 1987 or the Motor Vehicles (third party insurance) Act 1942.
S 6(9):
Despite s 6(8) this section applies in relation to a policy of workers compensation insurance entered into by an employer (whether entered into before or after the commencement of this subsection) with the employer:

(b) Being a corporation (other than a company that has commenced to be wound up), has ceased to exist.

(d) Being a company is in the course of being wound up.

19. On 27 November 2001 leave was granted by the Tribunal to the plaintiff to bring this claim against Mercantile. However any claim by the plaintiff against Mercantile pursuant to this Act is limited by force of s 6(7) to the sum fixed by the policy.

20. This section provides relevantly as follows:

S159(1)
A policy of insurance shall, insofar as it relates to any liability under this Act, contain only such provisions as are prescribed by the regulations but (subject to the regulations) may contain such other provisions relating to any liability at common law or under any Act or Commonwealth Act as are appropriate to any particular case.

(2) A policy of insurance shall provide that -

(a) The insurer as well as the employer is directly liable to any worker insured under the policy and, in the event of the worker’s death to the dependents or other persons to pay the compensation under this Act or other amount independently of this Act for which the employer is liable; and

(b) The insurer is bound by and subject to any judgment, order, decision or award given or made against the employer of any such worker in respect of the injury for which the compensation or amount is payable. [emphasis added]

(5) A liability, under the policy of insurance, of an insurer to a worker under a provision inserted in the policy under (2) or (3) is enforceable as if the worker were a party to the policy.

21. S 159 is a successor to s18(3) of the Workers Compensation Act 1926 which was originally enacted in the following terms:

S18(3)
Every policy of insurance or indemnity indemnifying an employer against his liability under this Act shall contain only such provisions relating thereto as are prescribed, but may contain such other provisions relation to liability under any other Act or Commonwealth Act or at common law as are appropriate to any particular case.

Any contravention of this provision shall not annul such policy or diminish or affect the liability of the insurer to the person insured under such policy.

Every such policy shall provided that the insurer shall as well as the employer be directly liable to any workers insured under such policy and in the event of his death, to his dependents, to pay the compensation for which an employer is liable, and that the insurer shall be bound by and subject to any order, decision, or award made against the employer of such worker under the provisions of this Act. [emphasis added]

22. The operation of this section was illustrated by the facts in Miller v Law Union and Rock Insurance Company Ltd ((1969) 71 SR NSW 201). The worker there suffered incapacitating injuries as the consequence of operating an unguarded machine in the employ of Leonard. He recovered an award of compensation against Leonard who failed to satisfy this award. Upon his action against Leonard’s insurer pursuant to s18(3) the insurer asserted that because it was entitled to refuse indemnity to Leonard upon the grounds that he, well knowing of the dangers of the machine, was in breach of a condition of the policy, it could not be liable to the worker. The Court rejected this defence and held that the rights conferred by s18(3) were independent of such rights the insurer may have to avoid the policy at the suit of the insured for breach of condition. Asprey JA at p 223 said:

The liability of the insurer to the worker is to pay to the worker, not the amount which the insurer is liable to recoup to the employer by way of indemnity, but the compensation for which the employer is liable to the worker, and, in the proceedings between the worker and the employer for the ascertainment of that amount, the breach by the employer of conditions in the policy are an irrelevant consideration. Once that amount has been determined by an award against the employer in favour of the worker the insurer becomes directly liable to the worker and cannot challenge the award for the reason that the statute provides that he is bound by and subject to it.

23. Wallace P said at 209:

The words of Walsh J in the State Mines Control Authority Case `if it should appear that its language provides for an indemnity either greater or less in its extent than might have been expected having regard to the provisions of the Act, nevertheless the liability of the insurer must be measured by the contract itself’ - which perhaps, strictly speaking, were obiter - were made in the absence of an issue of invalidity but cannot in any event be made applicable to the insurers direct liability to a worker in whose favour an award has been made.

24. The Workers Compensation (Amendment) Act 1953 amended s18(1) of the Workers Compensation Act 1926 so as to impose compulsory insurance upon employers in respect of "an amount of at least £3,000 in respect of liability independently of this Act for any injury to such worker", that is, against common law liability.

25. S 18(3) was re-enacted by this amending Act as s18(3)(a) in these relevant terms:

S18(3)(a)
Every such policy shall provide that the insurer shall as well as the employer be directly liable to any worker insured under such policy and in the event of his death, to his dependants, to pay the compensation or other amount for which the employer is liable, and that the insurer shall be bound by and subject to any judgment, order, decision or award given or made against the employer of such worker in respect of the injury for which such compensation or amount is payable.

In this paragraph the expression `other amount’ means an amount not exceeding the amount for which the employer has obtained a policy of insurance or indemnity in respect of his liability independently of this Act for any injury to any such worker. [emphasis added]

26. Direct liability of the insurer to the worker in respect of common law damages was by this section limited by the extent of the indemnity in the policy, a position similar to that obtaining pursuant to s6 of the Law Reform (Miscellaneous Provisions) Act 1946.

27. The Workers’ Compensation (Amendment) Act 1980 amended s18(1) by the deletion of the words "at least $100,000"(to which sum the compulsory cover had by then been raised) and insertion of the words "unlimited amount".

28. The Workers Compensation (Amendment) Act 1981 further amended s18(3)(a) by the deletion of the words "not exceeding the amount for which the employer has obtained a policy of insurance or indemnity in respect of his liability"and insertion instead of the words "which the insured person is liable to pay." S 2 of the amending Act provided that this amendment was to commence on the date of assent which was given on 28 May 1981.

29. Parliament in so amending s18(3)(a) did not seek to distinguish between those policies of insurance issued before the commencement of the Act in which the common law indemnity was limited, and those issued after that commencement. In both cases the insurer was bound by the judgment amount which the insured was liable to pay to the plaintiff. This conclusion is inferentially supported by the provisions of clause (8) of Schedule 6 to the amending Act which provided as follows

(8) Where a policy of insurance or indemnity against liability under the Principal Act-

(a) was in force at the time of an injury that occurred before the date of assent to this Act ; and

(b) was not being maintained in force on that date,

the policy shall be deemed always to have insured the employer against any additional liability to which he may become subject on or after that date in respect of that injury by reason of any amendment made by this Act.
Although the amendment to s18(3)(a) imposed no additional liability on the employer at common law it did in terms impose liabilities on insurers beyond the limits of the risk accepted.

30. The Workers Compensation Act 1987 repealed the whole of the Workers Compensation Act 1926 including s18(3(a) and abolished the rights of workers to recover damages from an employer in respect of an injury for which compensation was payable under the Act. S159(2) was then enacted in these terms:

A policy of insurance shall provide that -

(a) The insurer as well as the employer is directly liable to any worker insured under the policy and, in the event of a worker’s death, to the dependents or other persons to pay the compensation under this Act for which the employer is liable; and

(b) The insurer is bound by and subject to any judgment, order, decision or award given or made against the employer of any such worker in respect of the injury for which the compensation or amount is payable.

31. The Workers Compensation (Benefits) Amendment Act 1989 restored the rights of employees to sue their employer for damages. S155(1) of the Workers’ Compensation Act 1987 was amended to require employers to maintain in force a policy of insurance "for an unlimited amount independently of this Act” and s159(2) was amended into its present form providing that the insurer was bound by judgment against an employer for an “other amount independently of this Act", that is a judgment at common law.

32. Prima facie the words of s159(2)(a) entitle the plaintiff to succeed against Mercantile to the full extent of the judgment against Auqual. Such a construction is supported by authority. In Registrar of the Workers Compensation Commission (NSW) v National Employers Mutual Insurance Association Ltd ((1978) 141 CLR 462) Aitkin J at 490 said of s18 of the Workers Compensation Act 1926:

In my opinion the provisions of s 18 make the liability of the insurer to the employer match the liability of the employer to the worker or his (dependents) and that is a fundamental feature of the scheme. That scheme likewise makes the liability of the insurer to the worker match the liability of the employer to the worker.

33. While a literal reading of the section may work to the disadvantage of an insurer, such consequence is, in context, not unjust. The liability of the insurer in this case is also a liability imposed by the operation of s151AB which is in the following relevant terms:

151AB(1) If an employer is liable independently of this Act for damages for an occupation disease contracted by a worker, the following provisions have effect for the purpose of identifying from among a number of insurers and the policies of insurance obtained by the employer for different periods which insurer or insurers is liable to indemnify the employer for the full amount of the damages or which is liable to pay the full amount of damages to the worker (without any right to a contribution from those other insurers):

(a) Any liability of that employer that arose before the relevant commencement is taken to have arisen when the worker was last employed before that commencement by that employer in an employment to the nature of which the disease was due.

[Relevant commencement means the commencement of the 1987 Act at 4 pm on 30 June 1987. It is here irrelevant].
(4) This section does not affect the amount of damages recoverable by a worker.

(5) This section applies to any liability arising before or after the commencement of this Act and to any policy of insurance issued before or after that commencement.

34. A short history of s151AB will assist. S 7(4) of the Workers Compensation Act 1926 identified the employer who was to pay compensation in cases of diseases contracted by a gradual process as "the employer in whose employment the worker is or who last employed the worker". That employer was entitled to contribution from other employers who during the twelve months preceding incapacity employed the worker "in any employment to the nature of which the disease was due". S 7(5) (as amended in 1929) deemed the injury to have happened at the time of the worker’s incapacity. In Dow v Commissioner for Railways (1952 WCR 73) at 81, Herron J spoke of s7(4) in these terms.

It has been said that the legislature has placed a worker suffering from an industrial disease in a somewhat favourable position. It is a gradual deterioration due to the employment which may be going on during service by the workmen under several employers in the same industry until it results in disablement which may appear when the worker has only just begun to work under a particular employer. Under these circumstances it would be very difficult for the workmen to pick the proper employer to sue. The legislature saw the difficulty and provided a conventional and artificial means of enabling the workmen to get compensation, leaving the various employers to fight out their proportion of the liability between themselves. Parliament met the position by providing that the employer liable to pay the workman should be the last employer in the particular kind of employment.

35. The decision in State Mines Control Authority v The Government Insurance Office of NSW and Coalmines Insurance Ltd (1964 38 WCR 168) exposed an oversight in this scheme in regard to insurance. The plaintiff employer was liable to compensate a former employee who became incapacitated by pneumoconiosis, a disease of gradual onset, many years after leaving its employment. The employer failed in its claim for indemnity from the insurer on risk during the period of employment because no "injury"pursuant to s7(4) occurred during the period of indemnity. It also failed in its claim against the insurer on risk at the time of "injury" because "the statutory form of policy does not cover a liability to a person who was not in the insured’s employ during the currency of that policy."

36. As Walsh J stated in his judgment:

For any purpose relevant to a claim for compensation to which s 7(4) applies it is pointless to inquire when the injury, that is, the contracting of the disease, really happened.

37. To remedy this gap in the compulsory insurance scheme parliament enacted the Workers’ Compensation (Amendment) Act 1964 which inserted s18(6A) of the Workers’ Compensation Act 1926 in the following terms:

(6A) Where before or after the commencement of the Workers Compensation (Amendment) Act 1964 an employer has become liable under this Act to pay compensation to a worker in respect of incapacity resulting from an injury referred to (4) or 4A of s 7 or has become liable under s 16 to pay compensation to a worker in respect of an injury referred to in (1A) of that section, then for the purpose of determining whether any insurer or which of two or more insurers is liable under a contract of insurance or indemnity in respect of that compensation, the liability of the employer shall notwithstanding the provisions of s5 of the said s 7 and of (1A) of the said s 16be deemed to have arisen immediately before the worker ceased to be employed by the employer in the occupation that gave rise to the disease

38. The most significant piece of legislation in the evolution of s151AB was the Workers’ Compensation (Dust Diseases) (Amendment) Act 1967. This Act amended s18(1) of the Workers Compensation Act 1926 so as to require employers to insure against liability at common law in respect of dust diseases and enacted s18(6B) of the Workers Compensation Act 1926 in these terms

(6B) For the purposes of any policy of insurance or indemnity obtained by an employer after the commencement of Part III of the Workers Compensation (Dust Diseases) Amendment Act, 1967, or obtained by him before and being maintained in force after such commencement, the liability of the employer, independently of this Act, for an injury, being an occupational disease, to a worker shall be deemed to have arisen when the worker was last employed by the employer in an employment to the nature of which the disease was due.

39. In his second reading speech to this Bill the Minister said:

There do exist particular problems in regard to compensation for dust disease sufferers. The insidious onset of dust diseases means that sufferers may only become aware of the exact nature of their ill health many years after their last exposure to dust, and the Government is convinced that these problems demand special treatment. (Hansard p. 3755).

At present there is no compulsion upon employers to take out insurance policies against common law liability to workers in respect of silicosis. The bill requires employers to take out such insurance, so that the common law liability of employers against all dust diseases must be covered. It is proposed to amend the principal Act to increase from $40,000 to $50,000 the minimum indemnity under insurance policies in respect of common law liability for all injuries and diseases. To remove difficulties that have arisen in determining precisely when the common law liability of the employer for dust diseases and other occupational diseases actually occurs, an amendment is proposed by which the liability is deemed to have arisen when the worker was last employed by the employer in the occupation that gave rise to the disease. (Hansard p. 3761)

40. The operation of s18(6B) was considered by Yeldham J in Wunderlich v Manufacturers Mutual Insurance (1981 2 NSWLR 678). A worker was employed by Wunderlich from 1953 to 1 August 1977 in conditions giving rise to liability for the worker’s asbestos related disease. Between 1953 and 28 February 1977 Manufacturers Mutual insured Wunderlich against common law liability. During the last six months of the plaintiff’s employment Wunderlich was a self insurer. Wunderlich sought to avoid the application of s18(6B) arguing that the release of the insurance company from its former contractual obligation to indemnify was "manifestly absurd" and that the section should be read down to avoid this result. Notwithstanding these submissions, Yeldham J concluded that s18(6B) provided a code for determining whether or not a particular insurer is liable to indemnify an employer in respect of damages payable by that employer for an injury of the relevant kind and that the section in its terms provided the insurer with a defence to the claim upon the policy. He said at 685:

In the present case I regard the consequences of the literal interpretation of the subsection, for which the defendant contends, as neither absurd nor unjust. It is obviously to me a problem which, at least in relation to payments of compensation, was highlighted in [State Mines Control Authority v GIO and Coal Mine Insurance Ltd] although s18(6B) was enacted three years after s18(6A) and although the words used are different, I think that their object and their operation is the same.

41. S 18(6B) was repealed with the whole of the Workers’ Compensation Act 1926 by the Workers Compensation Act 1987. Following upon the restoration of common law rights in 1989, s151AB was inserted in the 1987 Act by the Workers Compensation (Amendment) Act 1991.

42. In Johnson and Johnson Pty Ltd v Manufacturers Mutual Insurance Ltd ([2000] NSWSC 155) Young J held that a self insurer was not an insurer within the meaning of s151AB and the section could not apply so as to impose liability on that self insurer without rights to contribution. Although it appears difficult to reconcile this conclusion with that of Yeldham J in Wunderlich, Young J said nothing in his judgment inconsistent with the literal application of s151AB. That construction of Young J, although irrelevant to the present claim, does prevent a possible injustice.

If after 30 years of work with a negligent employer a worker was disabled by an occupational disease he would otherwise recover nothing if his employer was insolvent and his insurance policy had lapsed for the last few weeks of employment. This would follow even if the last period of employment of the appropriate character in fact made no material contribution to the worker’s disease caused by years of exposure during which the employer had maintained adequate insurance cover that would otherwise respond to the risk.

43. The submissions of Mercantile in the present case would if accepted create a similar injustice. If an employer, whose continuing negligence over many years caused a gradual deterioration in a workman’s lungs, was insured by several insurance companies over the period, each with a limited cover, the aggregate of the worker’s entitlement to damages for the harm suffered in the several periods of cover would at common law be spread among the various insurers in proportion to the contribution to the damage done while each was on risk. The worker would receive a greater sum than that limited by any one policy.

44. Mercantile submits that the effect of s151AB is to limit such a worker’s rights against the last insurer to the limit of indemnity written in the policy. This submission is inconsistent with a literal reading of s151AB.

45. Upon the present state of authority s151AB is to operate in its terms as a code. It does remove the liability of some insurers and imposes a burden on others. The extent of this burden is to be found within the terms of s151AB(1) which requires that the last insurer indemnify the employer for, or pay to the worker, "the full amount of the damages". S 151AB(4) expressly provides that the section does not affect the amount of damages recoverable by the worker and s151AB(5) applies the section to policies of insurance issued before the commencement of the Act.

Incidental Arguments

46. It is apparent that upon this construction inconsistencies exist between s159(2) of the Workers Compensation Act 1987 and s6(7) and s6(9) of the Law Reform (Miscellaneous Provisions) Act 1946.

47. It was inconsistency between the provisions of s 6 and s 18(3) of the Workers Compensation Act 1926 (the latter requiring that a judgment be first obtained against the insurer before suit) that led Isaacs J to hold in Spain v Metropolitan Meat Industry Board ((1971) 1 NSWLR 91) that the provisions of s6 were not available to persons otherwise able to claim pursuant to s18(3) which constituted its own code.

48. Parliament, however, presumably conscious of that decision, inserted s6(9) in the Law Reform (Miscellaneous Provisions) Act by the Workers’ Compensation Legislation Amendment (Dust Diseases and other matters) Act 1998. If it was the intention of parliament by this measure to remove such rights of workers as were constituted by the combined effect of s151AB and s159(2) then one would have expected that intention to have been spelt out in clear language.

49. A further argument advanced by Mercantile focuses upon the words of s159(5) providing that

(5) A liability, under the policy of insurance, of an insurer to a worker under a provision inserted in the policy under (2) or (3) is enforceable as if the worker were a party to the policy.

Mercantile asserts that if the liability of Mercantile or NEM is to be enforceable "as if the worker were a party to the policy" the worker is in consequence bound by the terms of the policy including the limit of indemnity.

50. Two answers may be given to this contention. First, that the liability on which the plaintiff now sues is not a liability under a policy of insurance created by s159(2)(a) but the independent statutory cause of action created by s159(2)(b). Second, s159(5) merely confers upon the plaintiff the status to sue. Any suggestion that he is bound by the terms of the policy cannot stand with the decision in Miller v Law Union and Rock Insurance Co Ltd (supra) discussed in pars 21 and 22 above, nor with the provisions of s151AB(4) by which the amount of damages recoverable by a plaintiff cannot be affected by the identification of a particular insurer who is to respond to the judgment and pay the "full amount" of the damages.

CONCLUSION

51. The combined effect of s151AB, s151AC, and s159(2) of the Workers Compensation Act 1987 entitles the plaintiff to judgment against Mercantile for the full amount of his judgment first obtained against his employer Auqual.

52. Judgment for the plaintiff in the sum of $68,621.10.

Mr A J Leslie QC instructed by Turner Freeman appeared for the plaintiff.

Mr I G Harrison SC with Mr J De Greenlaw instructed by McCulloch and Buggy appeared for the defendant.