SEPTEMBER 2008

IN THIS ISSUE

Please Select an Article to Read

• Australian Law Reform Commission’s Privacy Report – Health Update
• Special Commission of Inquiry into NSW Public Hospitals releases its First Report
• Pharmacists and Franchising
• Accessing funds in the current market environment
• Aged Care Update
• Amendments to the NSW Medical Practice Act introduce compulsory reporting of doctors for sexual misconduct, substance abuse and incompetent clinical practice
• Case note: Peer evidence as to competent medical practice
• Proposed changes to general requirements for labelling of medicines
• Windfall for Medical Insurers in Medical Malpractice Cases
• Protecting Root Cause Analysis in NSW private health facilities
• Case Note: Court Of Appeal reversal on Domestic Assistance Threshold under Civil Liability Act
• New procedures for Medical Negligence Claims in the NSW Supreme Court
• IVF Donors to lose anonymity under new legislation in New South Wales

 

Windfall for Medical Insurers in Medical Malpractice Cases

In most circumstances where a worker’s injury gives rise to a tortious liability on the part of a third party, the workers compensation insurer has the right to recover compensation payments from that third party, pursuant to Section 151Z of the Workers Compensation Act 1987 (NSW), or similar statutory provisions in other States.

The situation is different, however, where a worker sustains an injury which is then complicated or aggravated by medical treatment received. There have been a series of Court of Appeal decisions which have found that in those circumstances, Section 151Z does not operate to allow the workers compensation insurer to recover the payments made.  

In Hood Constructions Pty Limited v Nicholas [1987] 9 NSWLR 60, a worker sustained an injury in the course of his employment and was paid compensation pursuant to the Workers Compensation Act.  The worker required surgery and as a consequence of the negligence of the treating doctor, suffered an additional injury.  In the course of proceedings for damages against the doctor, the worker sought a declaration that payments made to him pursuant to the Workers Compensation Act, were not repayable pursuant to Section 151Z. 

The Court stated that the injury caused by the medical treatment was not “an injury for which compensation is payable” within the meaning of Section 151Z, notwithstanding the fact that the surgery was undertaken to remedy an injury sustained in the course of employment. The Court went on to find that the worker’s damages against the doctor were to be reduced to take account of the compensation payments already received.

In Rooty Hill Medical Centre Pty Limited v Gunther [2002] NSWCA 60, a worker sustained an injury in the course of his employment and as a consequence of negligent medical treatment, sustained a further injury for which workers compensation was paid.  He sued the medical centre where the treatment had been given seeking common law damages.

The Court of Appeal confirmed that Section 151Z of the Workers Compensation Act did not apply and the plaintiff’s damages had to be reduced to give effect to the overriding intention of parliament that a worker should not be entitled to both compensation and damages.  The Court stated it could only prevent the worker retaining both compensation and damages, by reducing his damages by the amount of compensation which had been paid and which could be paid in the future.

The practical consequence of this line of authorities is that medical negligence insurers get the benefit of the plaintiff’s workers compensation entitlements because common law damages are reduced accordingly.  Moreover, they have no obligation to reimburse the workers compensation insurer for any increased exposure it may have as a result of negligent medical treatment provided.

Alternative Actions

There are a number of cases where the workers compensation insurer has sought to avoid the operation of the above decisions, by relying on other common law remedies. 

Per quod servitium amisit

Attempts have been made by workers compensation insurers to rely on the principle of per quod servitium amisit, which is a claim by an employer for damages for the loss of services of a worker. The claim is brought in the name of the employer, pursuant to the insurer’s right of subrogation. The principle states that where a person who is rendering a service under a contract of service, sustains injury through the negligence of a third party, which prevents him from continuing to render that service, the employer may recover compensation from the wrongdoer for the damage sustained from that loss of service. (See Commonwealth v Quince [1944] 68 CLR 227).

It seems, however, that this principle cannot be relied on by an employer or workers compensation insurer seeking recovery of additional workers compensation payable as a result of negligent medical treatment.  This because the existence of a special statutory right of recovery under Section 151Z has been held to exclude any alternative common law claims for recovery of workers compensation payments.  (See Sydney City Council v Bosnich [1968] 3NSWLR 725 and GIO Australia Limited v Robson & Anor [1997] 42 NSWLR 439. )

Alleged Breach of Duty owed by the Medical Provider to the Employer

Workers compensation insurers have also sought to bring a claim against the medical provider alleging a breach of a duty by the medical provider to take reasonable care to avoid causing economic harm to the employer. 

The decision of the Victorian Court of Appeal in Scott v. Bowyer & Anor (1998) 1 VR 207 involved a claim for recovery of worker’s compensation payments by an employer against the driver of a motor vehicle which had injured the employee.  The Court dealt with the issue as to whether the driver of the vehicle owed a duty to the employer not to cause economic loss, in the form of worker’s compensation payments made by its insurer.  The Court held there was no such duty, because there was no relationship of proximity between the relevant class of act or omission and relevant kind of damage. 

The Court also concluded that payments were not recoverable as the worker’s compensation legislation was exhaustive, in the sense that it afforded a remedy which was the exclusive remedy.  In coming to that conclusion, the Court referred to and relied upon the decision of Sugerman AP in Sydney City Council v Bosnich. 

The Victorian decision was followed by Grove J in Ulan Coalmines Pty Limited v Hunter Area Health Service & Anor [1999] NSWSC 664. That case involved a claim for recovery of worker’s compensation payments made following supervening negligence by the hospital in its treatment of a work injury. 

Grove J stated that the plaintiff could only obtain damages for a breach of duty owing to it and not for a breach of duty to another.  Relying on the decision of Scott v Bowyer, Grove J found that there was no right of recovery by the insurer. 

Section 74(1) Trade Practices Act 1974

This section provides that in every contract for the supply of services by a corporation to a consumer in the course of a business, there is an implied warranty that the services will be rendered with due care and skill and that any materials supplied in connexion with those services will be reasonably fit for the purpose for which they are supplied.
However, it is unlikely that this section will provide a remedy for the employer or workers compensation insurer against a negligent hospital or health professional, because of the doubt as to whether the employer or workers compensation insurer is a contracting party for the provision of the medical treatment.

Conclusion 

It is clear that on the current state of the law, medical negligence insurers are the beneficiaries of a windfall where medical negligence occurs in the course of treatment for a compensable work injury.    The Court will reduce the amount of damages payable in respect of the medical negligence by the amount of compensation which has already been received and by the amount which the plaintiff is likely to receive in the future.  Expert evidence from a workers compensation lawyer is required to quantify the amounts of compensation which would be likely to be received by the worker in the future.

Alternative common law claims may be difficult to  establish  due to the absence of a duty of care or a contractual relationship between the employer or workers compensation insurer and the medical provider.

Written by Neroli Martin, Consultant