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Insurance Policies and Claims for Damages

Consider this scenario:  a self-employed carpenter earns $1,000 per week.  He has income protection insurance, mainly in case he suffers a work injury.  He is injured when, whilst visiting friends, a balcony he was standing on collapses and he falls to the ground.  He is off work for 12 months.  He brings a claim against the property owners for damages for lost income.

In that situation, has the carpenter suffered any loss?  He has not been able to work, but he happens to have income protection insurance which pays him his $1,000 per week. He is, on the face of it, no worse off.

This issue of ‘setting off’ income received from other sources, against damages that might otherwise be payable in legal proceedings, arises with reasonable frequency.  While the outcome in any individual case may turn on the particular type of insurance (or alternate source of income) that is involved; at the level of general principle these amounts are often not set off against damages.

That principle has formed part of the Australian common law since at least the early 1960’s and has been regularly applied including, relatively recently, in a case involving a river cruise gone wrong.

Briefly, a river cruise operator could not provide the experience it advertised because of major flooding; however it refused refunds to a number of customers, one of whom then sued. One issue in the case was whether the claimant had suffered a particular ‘loss’, as he had also taken travel insurance which paid out on his claim. Consistent with the principle discussed above, the NSW Supreme Court was satisfied damages were payable by the cruise company, despite the existence of the travel insurance policy, because it said it was intrinsically unfair that a defendant who is responsible for injury and loss should obtain a ‘windfall’ benefit, just because the injured individual had the prudence or foresight to take out insurance cover.

The case – and the general principle – is a reminder of two things. First, that if you are in a situation like our self-employed carpenter, although it may seem that you are not out of pocket, you may still be eligible to recover damages. Second, that if a defendant in Court proceedings claims  it is entitled to a ‘set off’ against the damages it may otherwise have to pay, close attention should be paid to that claim as it may not in fact be correct: Moore v Scenic Tours Pty Ltd (No 2) [2017] NSWSC 733.

Liability limited by a scheme approved under the Professional Standard Legislation

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