Recent amendments to the Workers Compensation and Rehabilitation Act 2003 (Qld) significantly affect indemnity clauses in service agreements. The amendment is especially important for contractors and labour hire businesses that use or supply labour into the mining and construction industries.

The amendment rose out of a situation very much like the following:

  • A mine site operator engaged a labour hire company to provide mine workers .
  • One of the supplied workers was injured on site.
  • The worker commenced a personal injuries damages claim against his employer, the labour hire company and the labour hire company’s insurer, WorkCover Queensland.
  • WorkCover sought a contribution from the mine site operator, on the basis that the mine site operator caused or contributed to the worker’s injuries.
  • The services contract between the labour hire company and the mine site operator however, included a clause by which the labour hire company indemnified the mine site operator against any liability for injury to a worker, even if that injury was caused by or contributed to by the mine site operator.
  • Whatever contribution the labour hire company’s insurer could recover from the mine site operator would go back to the mine site operator pursuant to the indemnity.

A worst case scenario is that the labour hire company could ultimately be liable for the additional liability incurred through the indemnity clause, having no insurance through WorkCover or another insurer for that risk.

This was the situation that the Queensland Parliament sought to remedy when it recently passed the Workers’ Compensation and Rehabilitation (National Injury Insurance Scheme) Amendment Act 2016 (Qld).

Under the amendment, an indemnity clause in the above situation will be void and ineffective as against a contribution claim by WorkCover, and WorkCover can pursue the operator for a contribution as if there was no indemnity clause at all.

Scope of the Amendments
The amendment which commenced on 8 September 2016 will apply in many situations, such as:

  • subcontractors or independent contractors injured on a construction site;
  • delivery drivers or couriers injured when loading or unloading goods at their customer’s premises;
  • a plant operator injured at site when operating equipment as part of a wet hire agreement.

The amendment is partially retrospective in that it applies to any damages claims that have not been settled or gone to trial as at that date.

What your business needs to do
The amendment is good news for contractors and all labour hire businesses that have been made to give such an indemnity clauses. These businesses however, should not be complacent and assume that the amendment protects them. They should ensure, that in the event of a principal relying on such a clause, they are adequately insured and protected in the event that the indemnity is upheld.

For businesses that engaged contractors or use labour hire companies however, it is important that they consider and review their personal injury insurance position given that now, the indemnity clause that they intended to rely upon may well be void.

Since the amendment was only passed in September this year, there are no decided cases which assist in identifying its full scope.
Also it appears to have no application in claims for property damage and/or consequential loss situations.

We strongly encourage businesses to:

  1. review the terms of their commercial contracts and ensure they understand the full implications of indemnity clauses; and
  2. ensure they regularly review their insurances with a knowledgeable insurance broker.

We have assisted many businesses with reviewing and drafting indemnity clauses. For advice about your commercial contracts and business risks please contact us.