On 14 June 2016, the Queensland Parliament introduced the Workers’ Compensation and Rehabilitation (National Injury Insurance Scheme) Amendment Bill 2016 (Qld) (Bill).
On 31 August, the Bill was passed (with amendments) that will constrain contractual indemnity clauses in workers’ compensation claims.
The Bill
The Bill is part of a broader social reform which includes the establishment of the National Injury Insurance Scheme for Queenslanders.
The Bill set out to restore the original policy intent of the Workers’ Compensation and Rehabilitation Act 2003 (Qld) (WCRA) and provide certainty to stakeholders after recent Court decisions interpreted certain provisions of the WCRA in ways that could adversely affect the operation of the scheme.
The Amendment
Clause 31: which will amend Chapter 5 of the WCRA states as follows:
‘236B Liability of contributors
(1) This section applies to an agreement between an employer and another person under which the employer indemnifies the other person for any legal liability of the person to pay damages for injury sustained by a worker.
(2) The agreement does not prevent the insurer from adding the other person as a contributor under section 278A in relation to the employer’s liability or the insurer’s liability for the worker’s injury.
(3) The agreement is void to the extent it provides for the employer, or has the effect of requiring the employer, to indemnify the other person for any contribution claim made by the insurer against the other person.
(4) In this section-
damages includes damages under a legal liability existing independently of this Act, whether or not within the meaning of section 10.’
The Bill also proposed to amend the definition of damages under section 10 of the WCRA, however, a motion in the parliament to change the definition was defeated.
For Parties
This amendment will mean that if:
- a common law claim has been made against an employer; and,
- the employer agreed to indemnify another party for that party’s legal liability; and,
- WorkCover Queensland brings a contribution claim against that party,
the party joined to the claim will be unable to enforce their contractual indemnity clause to neutralise the contribution claim.
In many claims, the addition of section 236B(3) will allow contribution claims to be made by WorkCover, with third parties constrained in their ability to enforce indemnities against employers. However, the application of section 236B in a claim will depend upon:
- who the parties to the relevant agreement are; and
- the wording of the indemnity.
For instance, in an agreement where:
- the parent company of an employer grants indemnity to a party; and
- the agreement was not between the ’employer’ and the other party,
- Praesent hendrerit eleifend.
- Cras molestie libero neque.
but the employer is referred to as part of a ‘contractor group’ or otherwise in the agreement, then section 236B may not apply to the agreement. In such a case, an entity related to the employer (such as a parent company) may remain liable for the indemnity granted to the other party.
Otherwise, the new Section 236B(3) may not operate to defeat actions in contract against employers by other parties (e.g. for breach of warranty or, for breach of an obligation to insure).
Once enacted, the amendment will apply to existing claims; if a settlement for damages has not been agreed or, a trial has not commenced.
How we can help
This article is not legal advice.
If you are a party to a personal injury claim involving a contractual indemnity, you should seek legal advice as to how that indemnity is likely to operate and whether insurance is likely to respond to the liability imposed by the clause.
Denning Insurance Law acts for employers, respondents and contributors in contractual indemnity claims. Call (07) 3067 3025 for a consultation.
