Insurance – Employers' Indemnity Insurance –
Conditions – Requirement to take all reasonable precautions
to prevent injury to workers – Whether the insured perceived
and deliberately courted the risk
In this case, the employer's indemnity insurer successfully
relied on a 'reasonable precautions' provision to deny the
employer's claim for indemnity in respect of the employer's
liability to an injured employee.
On November 11, 2011, work finished at Primepower at 11.00 am in
celebration of the managing director's birthday. The theme of
the work function was "eleven" and the managing director,
Peter Allen, organised a barbecue and 11 kegs of beer for staff,
apprentices and friends of the business.
Throughout the afternoon, apprentices attempted to start and
then 'seize' a disused 4-stroke diesel engine. The
apprentices took the engine to the workshop and got it to run. They
then moved the engine to a wash bay area, about 20m away from the
bar area of the social function. The apprentices sought advice from
Primepower staff about how to get the engine to run faster and
seize, and they sprayed a number of different substances into the
intake of the engine, including brake fluid and paint thinner.
Guests in the bar area could hear but not see the engine stop and
start on a number of occasions.
The plaintiff, an employee, took part in the activities to seize
the engine. He had been drinking. At about 7 pm an unidentified
person brought around a jerry can of petrol. The plaintiff and
another apprentice were near the engine at the time and attempted
to start the engine with the petrol. A fireball came from the
engine and the plaintiff was engulfed in flames, suffering serious
burns to 60% of his body.
The plaintiff issued proceedings against Primepower alleging
negligence and breach of a statutory duty. Primepower denied
liability and in the alternative pleaded contributory negligence
against the plaintiff. It also issued third party proceedings
against Allianz, who had denied liability to indemnify Primepower,
relying on a 'reasonable precautions' clause in its
Employers' Indemnity Policy.
The court held that Primepower breached its duty to the
plaintiff in failing to provide a safe place of work and a safe
system of work. The court assessed the plaintiff's degree of
contributory negligence at 15%. These findings were not
The court also held that the managing director, Mr Allen, had
recognised a danger and deliberately courted it, such that
Primepower did not comply with the reasonable precautions clause of
the policy and was not entitled to indemnity from Allianz. In
particular, the court held that Mr Allen:
was indifferent to what substances were being used by the
apprentices to seize the engine;
had a relaxed attitude towards alcohol in the workplace;
encouraged unsupervised apprentices who consumed alcohol to
work on the engine;
allowed intoxicated supervisors to give advice to the
knew the apprentices were drinking and deliberately allowed the
consumption of alcohol (this was not one beer consumed after work
but free flowing alcohol over a long period of time); and
took no steps to protect the apprentices who were working on
As a result, Primepower was left uninsured for liability for the
losses suffered by the plaintiff. Although the court was not
required to decide quantum, the sum would likely have been
significant given the extent of the employee's injuries.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
The failure of a party to call a witness does not necessarily give rise to an adverse inference being drawn in accordance with Jones v Dunkel (1959) 101 CLR 298. An unfavourable inference is drawn only if evidence otherwise provides a basis on which that unfavourable inference can be drawn.
This article examines common coverage issues and considerations for granting indemnity for criminal fines and penalties.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).