Another interesting TPD insurance case

Papadopoulos v MC Labour Hire Services Pty Ltd  & Anor (Ruling No 2) [2009] VSC 176 (5 May 2009)

Background of the TPD case

A tortfeasor, MC labour Hire, requested the court to reduce damages payable in relation to a personal injury occurring on 10 May 2001 by the Plaintiff’s $150,000.00 TPD benefit paid by his fund (Incolink) to him in relation to the same injury.

Incolink was a joint venture between employer associations and unions in the Victorian commercial building industry. Funds are paid into Incolink by employers for workers under the terms of an enterprise bargaining agreement or a workplace agreement. These include redundancy payments which are held on trust for employees and paid to them in times of unemployment.

Employers also pay amounts to Incolink which are used to purchase insurance products such as income protection insurance and portable sick leave benefits. Incolink obtains these insurance products through an insurance broker, Windsor Insurance Management, who also administers the insurance schemes on behalf of Incolink.

Decision

Beach J:

The Defendant carried the onus of establishing that a deduction should be made –  citing Transfield Pty Ltd v Mastroianni (1998) 18 NSWCCR 193).

The overarching precedent was cited as Bradburn v Great Western Railway Company [1854] EngR 538. That case held that in an action for damages for personal injury no deduction should be made from the damages by reason of the plaintiff having received a payment under an accident insurance policy taken out by the plaintiff.

The defendant attempted to argue that these facts were distinguished from Bradburn because the plaintiff didn’t pay the premium’s himself but this was seen as contradictory to Australian precedent.

Discussed approach in Watson v Ramsay [1960] NSWR 462 per Brereton J and cited paragraph [463] of that judgement which is as follows:

A superannuation scheme of the type involved here is therefore to my mind completely analogous to a policy of accident or sickness insurance taken out in the employee’s favour with his employer instead of with an insurer. Whether paid by him wholly or paid for partly by him and partly by his employer, it is nonetheless to my mind provided in consideration of his service to his employer, and where superannuation becomes payable before the normal retiring age, it is not payable in recognition of any injury which may have caused such retirement or in order to alleviate any loss of earnings, thereby occasioned, or as a discretionary payment or act of grace; it is payable simply and solely because the employee has by his work bought his entitlement to it; if it were not paid, and he sued for it, the fact that he had recovered damages for his injury from his employer or anyone else could not conceivably be pleaded in bar in that action.

The issue turns on the character and purpose of the payment – citing  Gibbs J in Redding v Lee (1983) 151 CLR 117

Also citing Mason and Dawson J in Redding

1. There is injustice in reducing damages on account of benefits received from benevolence.
2. Benefits of this kind are designed to assist the plaintiff, not from a wish to relieve the tortfeasor’s liability.
3. Their Honours said that pension and superannuation benefits “…purpose is to ameliorate the plaintiff’s situation irrespective of his right to recover compensation against the tortfeasor”.
4. At [138]:

For this reason no distinction should be drawn between pension and superannuation benefits to which the plaintiff has contributed and those to which he has made no contribution, although there is a stronger reason for refusing to reduce the plaintiff’s damages on account of payments which he has himself made, thereby diminishing the assets which he otherwise earns.

Beach J held in conclusion:

At [15] – premiums were not paid other than pursuant to a contractual obligation enforceable at the suit of the plaintiff. The payment was not intended to replace lost wages or remedy the plaintiff’s loss of earning capacity. The benefit was for the purpose of assisting the plaintiff, not for relieving a tortfeasor’s liability.

At [16] – whether the same approach is taken as in Redding v Lee or whether one takes the approach taken by Brereton J in Watson v Ramsay the result is the same. The Incolink payment was not dependent on the loss of wages or earning capacity for which the plaintiff claims damages and was not intended to replace the lost wages or remedy such loss of earning capacity.

At [17] –  In any event, the payment was not paid as some discretionary payment or act of grace. It was payable because the plaintiff had, by his work, bought his entitlement to it.

If the plaintiff had recovered damages from either defendant before the Incolink payment was paid to him, there is no suggestion his receipt of damages could have been pleaded in an        answer to that claim. It follows for the reasons I have given that the Incolink payment does not fall to be taken into account in the assessment of the plaintiff’s pecuniary loss damages.

Application for TPD benefit

Lump sum TPD benefit payments cannot offset common law damages however on the above reasoning, even if there is no provision in the contract (although there normally is) a defendant may have grounds to argue offset of income protection payments because it is dependent on the loss of wages or earning capacity for which a plaintiff claims damages and the income protection is intended to replace the lost wages or remedy such loss of earning capacity.

c.f. recent Bupa Australia Pty Ltd v Shaw (as joint executor of the estate of Norman Shaw) & Anor [2013] VSC 507, 26/09/2013): Bupa Australia was ordered repayment of $340,000 it spent in medical costs for Mr Shaw who later settled a medical negligence claim against his surgeon.