The importance of correctly defining ‘labour hire employee’.
Principals are not vicariously liable for the negligence of competent independent contractors.
No Liability for labour work performed under care, direction or supervision.
Penrith City Council v Healey; GIO General Ltd v Healey  NSWCA 161 related to a claim commenced by Mr Healey against Penrith City Council (‘the Council’) and GIO General Ltd (‘GIO’), as the public insurer of Usshers Pty Ltd (‘Usshers’) (now deregistered), in relation to a shoulder injury suffered during the course of his employment as a garbage collector. During the period from 7 February 2000 to 25 April 2005 Mr Healy was an independent contractor employed by Usshers Solid Waste Pty Ltd (‘Solid Waste’) a related company to Usshers to collect garbage. Usshers, rather than Solid Waste, had a contract with the Council for garbage removal.
Mr Healey initially made a Workers Compensation claim against Usshers however his impairment did not meet the 15% threshold and therefore he commenced negligence proceedings for breaches of a duty of care owed by both the Council as a ‘quasi-employer’ and Usshers as his employer.
At first instance both the Council and Usshers (GIO) were held to have owed a duty of care to Mr Healey and as a result of a breach of this duty he had suffered the injuries and disabilities claimed. Mr Healey was awarded $1million in damages and both the Council and GIO appealed this decision on separate grounds.
Council appealed regarding the issue of causation and Mr Healey’s claimed injuries and disabilities. The Court of Appeal held that Mr Healey was unable to establish a causal link between his distinct shoulder injury and Council’s duty of care to repair damaged bins, which it had not breached. Further, the Court held that the Council had no contractual obligation to supervise employees of independent contractors and it did not have day to day responsibility for Mr Healey’s work conditions. Council’s appeal was therefore allowed.
GIO appealed on two grounds: firstly, that Usshers owed no duty of care to Mr Healey, and secondly, that GIO was entitled to rely upon a policy exclusion which excluded public liability insurance for persons falling within the category of contractors or supplied labour.
By way of background, Usshers had an occurrence based public liability policy with GIO from 31 October 2004, which covered the date of the specific injury (29 November 2004). It remained Usshers’ public liability insurer after Mr Healey commenced employment with Solid Waste on 1 December 2004. Liability for employees was excluded and no claim was made on the policy with regard to Mr Healey being an employee.
The exclusion clause sought to be replied upon by GIO read as follows: “This policy section does not insure liability arising directly or indirectly out of or caused by, through, or in connection with, or for:…13. Contractors and Supplied labour…personal injury to any person who is not your employee but has been engaged to perform work on your behalf or for your benefit where the contract price or value of the total works relating to the engagement of the person (whether the work of the person forms all or part of such works) exceeds $20,000 during the period of insurance. However, this exclusion only applies to personal injury to persons: (a) who are employed by an employment or placement agency, labour hire company or any other organisation, government body or person whose business is, or includes, the supply of labour; and, (i) whose work is performed in whole or part under your care, control, direction or supervision” 
GIO’s appeal was allowed by two of the judges, Emmett AJA and Basten JA, with Simpson JA in dissent, however there were different opinions on the application of the exclusion clause.
Emmett AJA did not consider GIO was entitled to rely on the exclusion clause given that Solid Waste was not specifically a ’labour hire’ company under the policy, however he held that Usshers in fact did not owe a duty of care to Mr Healey as he was no longer an employee under the definition of the policy terms. Therefore he allowed the appeal.
Basten JA however held that exclusion clause 13 of the policy responded in the circumstances of the claim as the work being performed by Mr Healey was for the benefit of Usshers, the business of Solid Waste included the supply of labour, and the work was in part under the care, control, direction or supervision of Usshers. Therefore the policy did not respond to any liability Usshers may have had to Mr Healey (at ). Further, if the work was not at least in part under the care, control, direction or supervision of Usshers, it would have had no liability in any event ( and ). Therefore the appeal was allowed.
The varied views of the Court regarding the application of the policy exclusion clause highlights the fact that policy responses are guided by the circumstances of a claim and clear definitions of policy wording will assist the Court to determine the application of the same. Further, insurers need to be aware that liability and duty of care questions can be complicated by third party entities related to the insured’s business, especially in circumstances where these businesses are commenced during the policy period. To avoid complications in such situations re-wording exclusion clauses to cover the formation of such arrangements whilst a policy is on foot may assist in making clear the intended policy response to relevant claims.
Post by Hannah Glover and Freida Stylianou