In brief - Court grants uninsured leave to issue contribution notice on insurer
A recent District Court of Queensland case
found that an insurer declining indemnity could be joined directly to a personal injury claim by an uninsured party via section 16
of the Queensland pre-court injury process, the Personal Injuries Proceedings Act 2002
Insurer declines cover to massage therapist who allegedly injured patient during spinal manipulation massage
The issue arose as Mr Shapcott (the applicant), a massage therapist, who had been engaged by the claimant (Mr Gary Michael) to perform spinal manipulation massage, allegedly caused the claimant injury as a result of the massage treatment.
The claimant issued a claim pursuant to PIPA against Mr Shapcott. In turn, Mr Shapcott issued a contribution notice to another massage therapist who had also been involved with the claimant's massage therapy, the second respondent (Mr Paul Camac). The claimant then also issued a PIPA notice of claim on the second respondent.
The second respondent held a professional indemnity insurance policy for which indemnity was duly extended. The insurer appointed solicitors to act on the second respondent's behalf to conduct the defence to the claimant's direct claim, as well as Mr Shapcott's claim for contribution.
Mr Shapcott had no policy of insurance under which he was a "named insured". However, Mr Shapcott sought indemnity under the second respondent's policy of insurance. The basis of his claim on that policy of insurance was not disclosed in the judgment, although it is noted that Mr Shapcott performed the massage treatment at the second respondent's premises. The insurer declined cover for Mr Shapcott's claim.
Insurer disputes uninsured's legal entitlement to issue a contribution notice pursuant to section 16 of PIPA
Section 16(1) of PIPA and its corresponding Personal Injuries Proceedings Regulation 2002
requires a contribution notice to be served three months after the respondent receives a part 1 notice of claim or seven days after the respondent identifies someone else as a contributor. If that time has ended, the respondent may add a party as a contributor "out of time", but only with that person's agreement and the consent of the existing parties to the claim (or with the court's leave).
Having obtained the claimant's consent to serve a contribution notice "out of time", Mr Shapcott issued a section 16 PIPA contribution notice on the insurer, seeking its consent under section 16(1) and indemnity under the policy for the claimant's action against him.
The insurer did not provide consent to Mr Shapcott issuing the contribution notice "out of time" and disputed Mr Shapcott's legal entitlement to issue a contribution notice, namely on the ground that section 16 did not contemplate an insurer being joined directly to a PIPA claim based on a policy coverage dispute.
Thereafter, Mr Shapcott brought an application seeking leave to issue the contribution notice against the insurer.
The meaning of "indemnity" within section 16 of PIPA
The central question for the court was whether section 16 of PIPA permitted an insurer to be joined as a party (contributor) to a PIPA claim. Relevantly, section 16(1)(a) of PIPA allows a respondent to "…add someone else as a contributor… by giving the person a written notice… claiming an indemnity from, or contribution towards, the respondent's liability…".
Dorney J focused on the meaning of the word "indemnity" as found under section 16(1)(a) of PIPA and whether the pre-court procedures contemplate including an insurer as a party for PIPA's core purpose of negotiations directed towards settlement outside of litigation.
Mr Shapcott directed the court to Shanahan J's views expressed in Ridley Agriproducts Pty Ltd v CMAS Consulting Pty Ltd  QDC 284
Section 16 of [PIPA] does not confine the ability to add, or seek leave to add, a contributor to circumstances where the grounds on which the proposed contributor is said to be liable must be in relation to a claim for personal injury … s 16 of [PIPA] does not confine potential contributors to only those against whom a claim in relation to personal injury can be made… (At ).
The second respondent submitted that an absence to any references to "insurance" in PIPA meant that the context of section 16 did not include indemnity under an insurance policy.
Court grants leave to issue a contribution notice
Despite the insurer's submission that the reference in section 16 of PIPA to "indemnity" did not extend to a claim made for indemnity under a policy of insurance, Dorney J found that the reference can include an indemnity under an insurance policy because:
- "an insurer can be a "respondent";
- a respondent can join a "contributor" who, or that, can be an entity from whom, or which, an indemnity from liability can be claimed;
- the methods by which a main purpose of PIPA can be achieved - appropriate, speedy and early resolution - support the concept of all relevant entities having arguable liability being made part of the "pre-court procedures";
- the meaning of "indemnity" in other parts of PIPA… is consonant with insurance indemnity; and
- the text of section 16(1)(a), in context, and upon understanding purpose, supports a wider meaning than indemnity as a joint or concurrent tortfeasor (whether in tort or pursuant to a concurrent obligation under contract) or as a purely contractual indemnifier (outside insurance)." (At ).
On that basis, Mr Shapcott was granted leave to issue a contribution notice ("out of time") to the insurer.
An uninsured party may seek to join an insurer to a PIPA claim as a contributor
The decision of Shapcott means that a coverage declinature may not end an insurer's involvement in a PIPA claim. Under this authority, the uninsured party may seek to join an insurer directly to the PIPA claim as a contributor.
As a contributor under PIPA, the insurer would be required to comply with the terms of PIPA, including the obligations to:
- provide a contributor's response (pursuant to section 17);
- provide disclosure to the respondent issuer of the contribution notice (pursuant to section 29). This includes "reports and other documentary material about the incident alleged to have given rise to the personal injury to which the claim relates";
- participate in a compulsory conference (pursuant to section 36) (or dispense with the compulsory conference by agreement); and
- at its option, provide an offer to contribute to the issuer of the contribution notice (pursuant to section 41). The court may take into account an offer to contribute at the appropriate time on the question of costs.
If the matter is unresolved at the conclusion of the pre-court PIPA process (usually signified by the completion of a compulsory conference), a claimant has 60 days (unless otherwise agreed) to issue proceedings in the appropriate jurisdiction.
Prior to the Shapcott
decision, if a claim and statement of claim were brought against a party which continued to dispute policy cover with an insurer, the insurer would typically be joined by way of a third party proceeding during the litigated phase of proceedings.
In essence, the Shapcott
decision has provided an additional avenue for a disagreeing uninsured to engage an insurer in relation to its indemnity dispute prior to a formal litigation process.
Insurers may incur costs earlier but timely knowledge of an indemnity dispute has benefits
The disadvantageous consequence of this decision for an insurer is that costs will be incurred at an earlier stage defending its position and complying with the pre-court PIPA process, which more often than not can be a lengthy process (despite its contrary intention).
The beneficial consequences for an insurer, however, are:
- early knowledge of the uninsured's dispute and potential claim regarding cover;
- the creation of an opportunity for coverage issues to be ventilated with the uninsured party at an earlier stage, allowing the insurer an opportunity to deter that party from joining the insurer to litigated proceedings at a later stage or resolve the dispute for a commercial sum. Defending a third-party litigated claim ordinarily involves expenditure of far greater costs than the costs involved in a pre-court procedure; and
- as a contributor under PIPA, the insurer may provide the respondent uninsured with an offer to contribute (pursuant to section 41 of PIPA) which may offer cost protection in the event the insurer is brought into litigated proceedings via a third-party notice and the matter proceeds to trial.
This article has been published by Colin Biggers & Paisley for information and education purposes only and is a general summary of the topic(s) presented. This article is not specific legal or financial advice. Please seek your own legal or financial advice for any questions you may have. All information contained in this article is subject to change. Colin Biggers & Paisley cannot be held responsible for any liability whatsoever, or for any loss howsoever arising from any reliance upon the contents of this article.