Neurological Injury - When Sleep Still Does Not Count

In our earlier article, we examined the decision in Lachlan Shire Council v Stanley and the important reminder it provided for employers and insurers in defending sleep-related permanent impairment assessments. The central proposition is clear: a worker cannot obtain a separate assessment for a sleep and arousal disorder unless the worker establishes a primary sleep disorder following a neurological injury, as required by clause 5.10 of the NSW Workers Compensation Guidelines for the Evaluation of Permanent Impairment (Guidelines).

A growing body of authority confirms the position.

Since Stanley, several further Personal Injury Commission decisions have reinforced and expanded this position. Far from being an isolated authority, there is now a growing and increasingly consistent body confirming three key principles:

• Insomnia is generally a symptom rather than a neurological injury.
• Sleep disturbance resulting from pain is ordinarily assessed through the underlying compensable injury rather than as a separate impairment.
• Insurers should ensure any dispute concerning the existence of a neurological injury is clearly identified at an early stage and preserved throughout the litigation process.

Guler – pain-induced insomnia is not independently assessable

The first significant decision following Stanley was Standard Distributors Pty Ltd v Guler [2026] NSWPICMP 9 (Guler). This matter involved a worker who alleged severe insomnia arising from chronic pain following orthopaedic injuries and sought a separate impairment assessment for sleep disturbance.

The Appeal Panel rejected the claim and held the Guidelines do not permit an assessment where the sleep disorder is caused solely by pain. The Panel emphasised there are only two available pathways to assessment under Table 13-4: assessment of sleep apnoea under the respiratory chapter, or assessment of a primary sleep disorder following neurological injury under clause 5.10. Neither pathway was available on the facts and therefore, the Medical Assessment Certificate was revoked and the sleep disorder assessment reduced to 0% WPI.

Importantly, the Panel in Guler expressly stated the Guidelines do not permit an assessment for a sleep disorder arising only from pain. The Panel also observed that even if a worker suffers a neurological injury, a sleep disorder which is merely secondary to pain arising from that injury will not satisfy clause 5.10. This reasoning confirmed that the focus remains on whether the sleep disorder itself is primary and neurological in nature.

Bogdanovic – insomnia remains distinct from sleep apnoea

The position was strengthened further in Bogdanovic v Farlow Concrete Pty Ltd [2026] NSWPICMP 84, which involved allegations of both obstructive sleep apnoea and insomnia. The Panel carefully distinguished between sleep apnoea assessed through the respiratory chapter and insomnia assessed under the nervous system chapter of the Guidelines. While the Panel accepted a limited assessment for positional obstructive sleep apnoea, it rejected the insomnia claim. It held that clause 5.10 requires a sleep disorder which follows a neurological injury and that chronic insomnia allegedly arising from pain does not meet this requirement.

Of particular significance, the Panel rejected the argument that chronic insomnia becomes a neurological condition merely because neurological processes are involved in sleep regulation. The Panel held that the clause requires a primary sleep disorder following neurological injury, not a sleep disorder which later develops neurological characteristics or mechanisms. The distinction is important because many expert reports continue to rely on theoretical neurobiological explanations for chronic insomnia in an attempt to bring such claims within clause 5.10. The decision confirms that such reasoning is unlikely to succeed.

Carrasco – insomnia is a symptom, not a neurological injury

The issue was considered again in Carrasco v RKDOIG Pty Ltd [2026] NSWPIC 319. In this case, the worker claimed impairment for chronic insomnia said to arise from pain associated with orthopaedic injuries. The Medical Assessor (MA) concluded that chronic insomnia was not a neurological condition capable of attracting impairment under clause 5.10. Instead, insomnia was described as a symptom rather than a primary neurological disorder. The Commission accepted the MA’s opinion and entered an award for the respondent in respect of the alleged neurological injury.

This decision is particularly useful for insurers because it addresses a recurring evidentiary issue. Several respiratory and sleep physicians have sought to characterise chronic insomnia as a neurological condition once established. In this particular case, the MA rejected this proposition and stated that, in neurological practice, insomnia is regarded as a symptom rather than a neurological injury. The Commission also emphasised that a neurologist is the specialist best placed to determine whether a neurological injury exists.

Naiebzada – defining a primary sleep disorder

The most recent and most comprehensive analysis appears in Naiebzada v Sydney Waterproofers Pty Ltd [2026] NSWPICMP 491. This case concerned a worker who argued a lumbar spine injury caused radiculopathy which in turn caused chronic insomnia. Significantly, the Appeal Panel accepted there was evidence of neurological injury involving a spinal nerve root. However, despite accepting the existence of a neurological injury, the Panel still rejected the sleep disorder claim.

The Panel held that clause 5.10 requires not merely a neurological injury, but a primary sleep disorder following neurological injury. It explained that primary sleep disorders are those caused by impairment of neurological structures responsible for normal sleep regulation, typically involving brain structures associated with sleep and arousal function. By contrast, insomnia arising from pain caused by radiculopathy remains a secondary consequence of pain and therefore falls outside clause 5.10 of the Guidelines.

Importantly, the Panel undertook a detailed analysis of the meaning of the phrase "primary sleep disorder following neurological injury". It concluded that a primary sleep disorder is one caused by impairment of neurological structures responsible for regulating sleep, rather than a sleep disturbance which develops because an injured worker is experiencing pain. The Panel further endorsed earlier decisions that insomnia should be regarded as a symptom and not as a primary neurological condition in its own right.

The emerging approach to clause 5.10

Taken together, these decisions reveal a consistent approach being taken by the Commission in dealing with permanent impairment. The Commission has repeatedly rejected attempts to characterise insomnia resulting from pain as an assessable neurological impairment. The decisions establish that sleep disturbance secondary to pain, medication effects, orthopaedic injuries, radicular symptoms or other compensable conditions will generally be assessed through the underlying injury rather than through a separate sleep and arousal disorder assessment.

Importantly, these decisions have progressed beyond simply identifying insomnia as a symptom. They now provide judicial guidance on what constitutes a primary sleep disorder and why sleep disturbances that arise as a consequence of chronic pain fall outside the scope of clause 5.10 of the Guidelines. This distinction is becoming increasingly significant as workers continue to advance claims for sleep-related impairment based on chronic pain conditions.

Practical implications for insurers

For insurers, the practical lesson is clear. Whenever a worker presents a claim for permanent impairment arising from insomnia, sleep fragmentation or similar sleep-related complaints, close attention should be paid to whether there is evidence of a genuine neurological injury and whether the claimed condition is truly a primary sleep disorder. A failure to identify and challenge the neurological element may result in unnecessary referrals, complicated medical evidence and avoidable disputes.

Insurers should also ensure their dispute notices expressly address the neurological injury requirement. The above decisions demonstrate that preserving this issue from the outset can prove determinative. The Commission has shown a willingness to scrutinise attempts to characterise insomnia as a neurological condition and has consistently favoured a narrow interpretation of clause 5.10. The emerging body of authority now provides strong support for the proposition that clause 5.10 is limited in scope. It is directed to genuine primary sleep disorders caused by neurological injury, not ordinary insomnia arising from chronic pain.

Key takeaways

While each claim will ultimately turn on its own facts and medical evidence, the recent authorities demonstrate a clear trend toward rejecting sleep disorder claims where the alleged impairment is secondary to pain rather than a direct result of neurological dysfunction.

As these decisions continue to accumulate, insurers should remain vigilant in identifying and challenging the existence of a qualifying neurological injury. The recent cases demonstrate that the neurological injury issue is no longer a peripheral argument. It is increasingly becoming the decisive question in sleep-related permanent impairment disputes.