“Double insurance” or not? CTP insurer recovers 50% of the damages and costs paid to the victim of a car accident from the workers’ compensation insurer

In Insurance Australia Limited v Allianz Australia Insurance Limited [2022] ACTSC 75 (April 14, 2022), McWilliam AJ of the ACT Supreme Court was asked to determine whether a CTP insurer (NRMA) could recover 50% of the common law damages settlement amount it had paid to a worker injured in a car accident for the workers’ compensation insurer (Allianz).

The facts

The injured worker was traveling in a truck in Canberra driven by a colleague. The truck collided with the rear of another vehicle. The injured worker filed a workers’ compensation claim against his employer (compensated by Allianz), which was accepted.

The injured worker also filed a common law lawsuit for damages against the owner of the truck he was riding in at the time of the accident. The owner of the truck was not the injured worker’s employer and the NRMA issued the CTP policy for the truck.

NRMA settled the common law claim for damages of $1 million, including previous payments made by NRMA and workers’ compensation payments, plus costs of $100,000.00.

NRMA sought a declaratory relief that the injured worker’s employer was dual insured with respect to the injured worker’s claim for loss and damage, and that both NRMA and Allianz shared coordinated responsibilities. NRMA also sought an additional statement that the workers’ compensation insurer was responsible for contributing 50% of the settlement amount, including costs paid, to NRMA.

The law

The doctrine of double insurance arises when an insured is entitled to compensation from two different insurers with respect to the same liability. The logic behind the doctrine is that payment by one insurer benefits the other, and fairness requires that the burden be shared. The central question for the determination in this case was whether both insurance policies covered the same insured For him same risk (ie responsibility).

If that were the case, then NRMA and Allianz would share coordinated responsibilities. Applying the doctrine, this attracts a right of contribution between the insurers.

In his decision, McWilliam AJ reviewed several different authorities, including the Superior Court’s leading authority on the doctrine. Albion Insurance Co Ltd v New South Wales Government Insurance Office [1969] HCA55; (1969) 121CLR 342.

From his review of the cases, His Honor determined the following:

(1) The justification for the doctrine is fairness and is designed to balance what would otherwise be a disadvantage to one insurer and a benefit to another, depending on whom the claimant chooses to sue, in circumstances where the same person is insured for the same risk and could have been indemnified under either policy.

(2) For the doctrine to apply, notwithstanding the words used in Albion at 346 (in particular, the reference to the policyholder), it is not essential that the policyholder be the same. What is critical is that the risk being insured is the same (not discussed here) and that “the insured” is the same.

(3) The time to assess when the doctrine applies is the time of the accident, not a later date, since it does not matter who was actually sued, but who could have been sued.

(4) “The insured” is determined by identifying who is covered by each insurance policy. If there is a potential defendant liable to the claimant who, if sued, could make a claim on either policy (ie choose his or her insurer), double insurance applies.

conclusion

Applying the law to the facts of this case, Your Honor concluded the following:

  1. In accordance with the relevant CTP legislation at the time (the now repealed Road Transport (Third Party Insurance) Act 2008 (ACT)), the CTP policy expressly covered the driver’s employer and thus someone vicariously responsible for their employee’s acts, namely the at-fault driver.
  2. The employer could have been sued as a defendant for personal injury damages arising from the accident. Because of the operation of the CTP legislation, the employer could have chosen to go to NRMA or Allianz to compensate him, even though he had no direct contractual relationship with NRMA.
  3. If Allianz had indemnified the employer and paid the settlement amount that NRMA paid, any liability NRMA had to the employer under the CTP legislation would have been released.
  4. The doctrine of double insurance was applied and, consequently, McWilliam AJ ruled in favor of the insurer CTP, granting the declaratory relief requested by it and the interests according to the Court Procedures Regulations 2006 (ACT) which will be calculated from the date of filing of the claim.

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