A Western Australian court has drawn a clear line on when insurers must pay out in labour hire disputes, settling a $1.1 million claim after a mining accident.
In a decision closely watched by the insurance sector, the Supreme Court of Western Australia’s Court of Appeal handed down its ruling in AAI Limited trading as GIO v Pilbara Iron Company (Services) Pty Ltd [2025] WASCA 150. The case revolved around a workplace accident at the West Angelas iron ore mine, where a labour hire worker was seriously injured during routine operations.
The facts were straightforward but significant. Graham Fussell, employed by labour hire firm WorkPac, was operating a haul truck at the mine when a front end loader, driven by a Pilbara Iron Company (Services) Pty Ltd (PICS) employee, struck his stationary vehicle. The impact left Fussell injured, and the damages were agreed at $1.1 million.
At trial, the District Court found that PICS was negligent for failing to require a minimum safe distance between loaders and trucks during loading operations. The loader operator, Mr Reidy, was also found negligent for not maintaining a safe distance. PICS, as the principal, was held liable for Fussell’s injuries, and the case quickly became a test of how far insurance coverage would stretch in such labour hire arrangements.
The insurance dispute centered on a workers’ compensation policy issued by GIO to WorkPac, which included an extension to cover PICS as a principal. The extension stated that if an employee was injured during work performed under contract with a principal, and the principal’s negligence caused or contributed to the injury, GIO would indemnify the principal against common law liability.
PICS sought indemnity from GIO for the $1.1 million in damages. GIO, however, argued that the policy only covered breaches of a non-delegable duty, not vicarious liability for an employee’s actions, and that it was not liable for the legal costs of defending the claim.
The trial judge disagreed with GIO, ruling that the policy extension covered PICS’s liability for damages but not for legal defence costs. The judge found that the extension’s wording - specifically, the indemnity for “common law liability” - was broad enough to cover both non-delegable duty and vicarious liability.
On appeal, GIO challenged both the finding of negligence and the scope of the indemnity. PICS, for its part, cross-appealed, seeking indemnity for its legal costs. The Court of Appeal dismissed both the appeal and the cross-appeal. The court confirmed that the policy extension applied to both non-delegable duty and vicarious liability, but that indemnity was limited to damages, not legal costs.
The judgment is a wake-up call for insurers and brokers operating in the labour hire and mining sectors. It underscores the importance of clear policy wording and highlights the risks principals face when relying on insurance arranged by labour hire firms. The court’s decision makes it clear that, where policy language extends indemnity to principals for common law liability, insurers may be on the hook for significant damages - even if the principal’s liability is vicarious rather than direct.
However, the court drew a firm line on legal costs, holding that the extension did not require GIO to cover the costs of defending the claim. This distinction between damages and defence costs will be critical for underwriters and claims managers structuring future policies and extensions.
The ruling also reinforces the need for principals and labour hire companies to scrutinize the details of their insurance arrangements. With $1.1 million at stake, and the court siding with the insured on the scope of indemnity, the message is clear: in high-risk industries, the fine print matters.
