March 2005

Workers Compensation - A review of recent cases considering change in circumstance, & insurance policies

In this Bulletin we examine two recent, but quite different, decisions of interest to insurers and employers. The first is a decision of the Workers Compensation Commission dealing with the circumstances in which an employer can challenge an ongoing award of weekly compensation. The second is a decision of the Federal Court considering the move by Optus and Toll to leave the Victorian scheme and apply for self-insurance under the Commonwealth Comcare scheme.

Worthington v Alexander [2005] NSW WCC PD12

Section 55 of the Workers Compensation Act 1987 allows a review of an existing award of weekly payments by the Workers Compensation Commission. A worker or employer may apply to review an award if they can demonstrate "change of circumstances". Worthington v Alexander considers the interpretation of a "change in circumstances".

The Facts

Alexander injured his right wrist whilst working as a shearer in 1989. In 1992 he received lump sum compensation and, in 1993, an award for partial incapacity at the statutory rate. In 1996 he found full time work in a supermarket but an application to the Compensation Court to vary or terminate the existing award failed. From 2002 Alexander and his brother leased a hotel and Alexander worked at the hotel 18 hours per day, six days per week.

The employer filed an application to terminate or reduce the existing weekly compensation award on the basis that there had been a change in circumstances. An arbitrator of the Workers Compensation Commission dismissed the application, essentially on the basis that there had been no change in Alexander’s medical diagnosis. The employer appealed.

The Decision

Deputy President Fleming reviewed decisions on section 55, and found that there was no reason to restrict "change of circumstances" to medical issues or incapacity. She found that not every change of circumstances will be relevant to an application to terminate or reduce an award – for example a change of residence or marital status may not be relevant in some instances. But an analysis which looked only at the medical condition was too narrow. The matter was to be referred back to a new arbitrator to undertake a review of Alexander’s weekly payments.

The Implications

The case is useful in highlighting the steps needed to successfully approach the Commission to vary an award:

  • The onus of proof is upon the party asserting that there has been a change.
  • Establishing a "change of circumstances" is a threshold test, or a gateway to the review. Only where a change of circumstances is demonstrated is the arbitrator empowered to review the compensation entitlements.
  • A change of circumstances is not confined to medical issues. Other circumstances, including training or even changes in the labour market, would be relevant circumstances.

Victorian WorkCover Authority (VWA) v Andrews [2005] FCA 97

This case will be of interest to self-insurers, and large corporates contemplating self-insurance. It involves two companies, Optus and Toll, both of which have applied for self-insurance licences under the Commonwealth Comcare scheme. The decision largely concerns administrative and constitutional law, but the ramifications for State workers compensation schemes are potentially significant.

The Law

It is open to the Commonwealth Safety, Rehabilitation and Compensation Commission (Comcare) to issue self-insurance licences to employers. Where the employer is not a Commonwealth authority the first step in the process is for the relevant Minister to be satisfied that it would be desirable for the Safety, Rehabilitation and Compensation (SRC) Act to apply to employees of a corporation that "is carrying on business in competition with a Commonwealth authority or with another corporation that was previously a Commonwealth authority" [section 100 SRC Act].

The next step is for Comcare to consider a range of criteria including the financial resources of the corporation. Comcare also needs to be satisfied that the granting of a licence will not be contrary to the interests of the employees of the corporation.

The Facts

Both Optus and Toll applied to the Federal Minister to be determined as eligible corporations. They did so without any notice to the VWA. In the case of Optus, it was insured under the Victorian scheme paying premium of approximately $1.4 million per annum. Toll is a self-insurer under the Victorian scheme but made an annual contribution to the Fund of almost $250,000.

In both cases the Minister determined Optus and Toll to be eligible and in December 2004 Comcare issued a self-insurance licence to Optus. The Toll application was still before Comcare.

The VWA intervened by challenging the Minister’s determinations on two grounds. First, it argued the Minister failed to afford the VWA a fair hearing on the application and, second, that the powers of Comcare went beyond the constitutional powers of the Commonwealth Parliament.

The Decision

The Federal Court rejected both of the VWA’s arguments. It found that there was no obligation on the Minister to take into account the interests of the VWA.

Second, the Court was satisfied that the Federal Parliament did have power to legislate generally in relation to insurance "other than State insurance". If a general law passed by the Federal Parliament incidentally affects a State insurer that does not, of itself, invalidate the law.

The Victorian WorkCover Minister has indicated that special leave to the High Court will be sought.

Implications

Whilst the litigation may not be concluded yet, it is illustrative of the opportunities available to eligible corporations to consider a switch to self-insurance under the Comcare scheme. Only those corporations which compete with a Commonwealth authority will be eligible and, even then, the Comcare scheme will not suit all. But at a time when national workers compensation coverage continues to attract attention, this case highlights one option available to some self-insurers.

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