Beware contractual indemnities: Queensland Government to reverse the Byrne decision

Contractual indemnities are a common feature in transport services agreements, including in subcontracting agreements and labour hire agreements. Indemnity clauses often require the transport operator to indemnify the other party to the agreement for all claims for personal injuries ‘connected with’ the provision of the transport services, regardless of whether the transport operator’s negligence caused the injuries.

From the inception of the Queensland workers’ compensation scheme, WorkCover Queensland took the view that it was not required to indemnify an employer in respect of personal injuries sustained by an employee where the employer had assumed that liability pursuant to a contractual indemnity given to a third party.

However, in the landmark decision of Byrne v People Resourcing (Qld) Pty Ltd [2014] QSC 269, former Chief Justice Carmody held that, in certain circumstances, where a contractual indemnity in favour of a third party increased an employer’s liability, WorkCover was nevertheless required to indemnify the employer for the additional damages.

Now it looks like there will be a further turning of the tide: the Workers’ Compensation and Rehabilitation (National Injury Insurance Scheme) Amendment Bill 2016 (Qld) proposes to reverse the effect of the Byrne decision. If the Bill is passed, WorkCover will no longer be required to indemnify employers for any contractual liability they may have to third parties.

Importantly, the Bill proposes that the reversal will be partially retrospective – it will apply to all open claims that have not settled or proceeded to trial at the time the Bill is passed.

A parliamentary committee is consulting stakeholders and will report back to Parliament in the coming months. Subject to that review, it is expected Parliament will pass the Bill in about September or October this year.

The message for transport operators is simple – do not enter into agreements that include wide indemnity clauses without first consulting a lawyer and discussing the agreement with your insurance broker or insurer.