WorkCover WA has released a position statement on what it
described as an "emerging demand by principals in large
scale projects seeking broad workers' compensation policy
extensions to the traditional 'upward indemnity' from
contractor to principal" in major project contracts.
WorkCover WA was concerned at the proliferation of 'sideways
indemnities' being demanded on such projects by way of mutual
indemnity and hold harmless schemes, accompanied by waivers of
rights of subrogation, where the intention was for each party to a
contract to bear the cost and not seek recovery or contribution
from the other parties.
It noted that the Workers' Compensation and Injury
Management Act 1981 (WA) contained specific insurance
obligations for common law rights and certain statutory rights of
recovery and said it considered mutual indemnity agreements of the
nature described above were not contemplated by the Act and so
threatened the viability of the WA workers' compensation
According to the position statement "These arrangements
should not be adopted in commercial contracts or endorsed via
extensions to employers' indemnity contracts".
WorkCover WA was concerned such arrangements might transfer
liabilities from the public liability insurance market to the WA
workers' compensation scheme and so adversely affect
underwriters' risk and undermine statutory recovery
James Saunders, head of Construction at Kott Gunning, agreed and
acknowledged that this particular issue is becoming an increasingly
serious problem for contractors aiming to win work on major
projects but being subject to onerous provisions in the head
contract which may result in their being robbed of:
Protection they may otherwise have had under a policy of
Rights that they may otherwise have had against Third
Vidal Hockless, head of Insurance, also notes that some insurers
have expressed concern about the commercial pressure to provide
such insurance and have welcomed Workcover's position.
Companies and businesses wishing to contract in the current
market should bear in mind the warning published by WorkCover WA
and seek advice in respect to any issue of concern.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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