Australia: Don't play with fire: workplace injury and insurance cover

Last Updated: 4 August 2015
Article by Stephen Williams

The recent case of Canny v Primepower Engineering Pty Ltd and Allianz Australia Insurance Ltd [2015] WADC 81 is a classic example of the operation of Murphy's Law, namely; "anything that can possibly go wrong, does."

The facts are relatively simple. Friday 11 November 2011 was the birthday of Primepower's managing director, Mr Peter Allan. It was also Remembrance Day and, importantly, a workday. Mr Allan decided to throw a birthday at Primepower's workplace. The theme of the party was "Eleven." In line with the theme he arranged for 11 kegs of beer ($3,000 worth) for staff to consume. Given the theme it is perhaps not surprising the party also started at 11:00 am. At about mid-day, Primepower's apprentices decided to try to "seize" a disused diesel engine (or to run it to the point of failure). Later that afternoon, Mr Canny, a Primepower employee, decided to get involved. He, along with others at the party had been drinking. At about 7:00 pm a 20 litre jerry can of petrol was produced. The idea was, it seems, to see what effect the petrol may have had on the engine, which had been running all afternoon without seizing. Mr Canny decanted some petrol into an open container which he was holding when a fireball unexpectedly flew from the engine. He was engulfed in flames suffering burns to 60% of his body.

Mr Canny sued his employer alleging negligence. Primepower in turn sought cover under its employers' indemnity policy, held with Allianz. However, Allianz argued Primepower was not entitled to cover as it was in breach of the terms of the policy which required Primepower to take "reasonable precautions" to prevent workplace injury. Primepower then sued Allianz seeking policy cover.

The Court was asked to decide three things:

  • Was Primepower negligent?
  • If so, was Mr Canny guilty of contributory negligence?
  • Was Primepower entitled to cover under its policy with Allianz?

Her Honour Judge Stewart held that Primepower had breached its duty of care to Mr Canny in failing to provide a safe place and a safe system of work, because the attempts to "seize" the engine should not have been allowed and in the event such activity was ever contemplated, the consumption of alcohol should not have been permitted. Further, Her Honour noted this was not one beer drunk after work, but a celebration involving 11 kegs which had been in full swing for 8 hours at the time the accident occurred.

She also found Mr Canny guilty of contributory negligence as his actions in decanting petrol near the engine were not prudent. He had also been drinking and "his judgement was not 100%." He was considered to be "a young man with very limited experience." These factors perhaps led Her Honour to only find him 15% to blame for his injuries.

These two findings are not unusual or controversial.

However the third finding was and should be a salutary lesson to all employers. In deciding whether Primepower was not entitled to policy cover, Her Honour was required to consider whether Mr Allan recognised the danger of what was being done that day and deliberately courted it by intentional and considered action or inaction. She held:

  • He made no enquiry as to what flammable substances were being used in the attempts to "seize" the engine. He could have but chose not to.
  • He allowed the apprentices to work on the engine unsupervised.
  • He knew Mr Canny had brought petrol onto the premises but did not stop it being used. He could have.
  • He was indifferent to events and his inaction was a critical factor.
  • The activity was not planned and no trained employees were involved.
  • His attitude to the consumption of alcohol was relaxed even though he recognised the dangers. Had he followed Primepower's own policies, he should not have allowed alcohol consumption on a workday.
  • Despite his knowledge of the risks of injury, he encouraged unsupervised and potentially intoxicated apprentices to work on the engine and allowed intoxicated supervisors to give them advice.
  • Given the amount of alcohol consumed, the potential danger was increased so greater steps were required to protect Primepower's employees from the risk of injury. He took no such steps.
  • His actions were not inadvertent. They amounted to more than negligence. His conduct amounted to a deliberate flouting of the insurance policy and, in all the circumstances, it amounted to his courting of the danger.

She therefore held that Primepower did not comply with the "reasonable precautions" clause of its policy and so it was not entitled to indemnity. This meant Primepower was effectively uninsured and required to pay Mr Canny's damages out of its own pocket. The Court was not required to decide quantum, but given the serious nature of Mr Canny's injuries and his age, we would expect any award of damages, even if reduced by 15%, to be a not insignificant sum.

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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Stephen Williams
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