AAI Limited t/as Vero Insurance v GEO Group Australia Pty Limited

1. [1]

   MACFARLAN JA: I agree with the orders that Payne JA proposes and with his Honour’s reasons for judgment.

2. [2]

   SIMPSON JA: I agree with Payne JA.

3. [3]

   PAYNE JA: This is an appeal by an insurer from a decision arising from a personal injury suffered by an inmate at Parklea Correctional Centre (“Parklea”). The prisoner, Mr Shayne Mace (by his tutor), brought claims in negligence for personal injury against a number of parties, including the present respondent, the GEO Group Australia Pty Ltd (“GEO”), for injuries he suffered in March 2010, while an inmate at Parklea. GEO was at that time the new private operator of Parklea. Those claims were settled on terms approved by Harrison J in the Supreme Court in December 2015.

4. [4]

   GEO pursued a cross-claim against AAI Limited t/as Vero Insurance (“Vero”), with whom it had a “Medical Malpractice Civil Liability Insurance Policy” (“the Policy”). GEO made a claim under the Policy in respect of Mr Mace’s claim in May 2012. GEO was successful before the primary judge, who found that Vero was liable to indemnify GEO under the Policy for the payment made by it to Mr Mace.

Brief facts

1. [5]

   On 18 February 2010, Mr Mace was charged with armed robbery offences and held in the police cells at Campbelltown overnight. On 19 February 2010, he was refused bail and was transferred to the Metropolitan Reception and Remand Centre in Silverwater, where he was placed in protective custody because he was fearful of other inmates.

2. [6]

   On 3 March 2010, Mr Mace was transferred to Parklea on remand where he remained in protective custody.

3. [7]

   As the new private operator of Parklea, GEO was contractually obliged to the State of NSW to provide psychological and counselling services to inmates at the prison. A variety of other medical services were agreed between GEO and the State to be provided to inmates by Justice Health, a NSW Government health services provider.

4. [8]

   Upon arrival at Parklea, Mr Mace was assessed by employees of Justice Health in the prison’s reception area. He advised them that he was taking medication for schizophrenia and depression. He was not provided with any medication to address those conditions. He was identified as being on the methadone program and provided with that drug by Justice Health in the reception area.

5. [9]

   He was seen again by employees of Justice Health the following day, 4 March 2010, for a review of his methadone dosage. He was also provided with medication to treat constipation. He was not provided with medication to treat schizophrenia or depression. There is no record of Mr Mace having any contact with Justice Health (or any health services provider) after 4 March 2010.

6. [10]

   On 7 March 2010, Mr Mace jumped off an upper level landing at Parklea and suffered serious injuries. The particulars of negligence in his statement of claim identified serious physical injuries and brain injuries incurred as a result of the fall.

7. [11]

   It was common ground that no psychologist or counsellor employed by GEO had any contact at all with Mr Mace prior to the incident in which Mr Mace was injured.

The proceedings brought by Mr Mace

1. [12]

   Mr Mace sued the State of New South Wales, Justice Health and the present respondent, GEO, the private operator of Parklea, in the Supreme Court. The case was settled by all three defendants.

2. [13]

   The essence of Mr Mace’s claim against GEO was that it failed to conduct an appropriate risk assessment of Mr Mace upon his arrival at Parklea or at all, that it failed to provide him with access to psychological services and that it failed to refer him to Justice Health (who employed medical professionals with the authority to prescribe relevant medication) for treatment or further assessment. As against GEO (described in the pleading as the “third defendant”), Mr Mace’s pleaded case was as follows:

3. [14]

   GEO settled the claim made by Mr Mace and in the present proceedings Vero admitted that the settlement was a reasonable one.

4. [15]

   By GEO’s second further amended statement of cross-claim it pleaded, relevantly:

5. [16]

   Accordingly, the claim in the Supreme Court made by GEO against Vero was expressly limited to the claim made against GEO by Mr Mace.

The relevant terms of the Policy

1. [17]

   Vero and GEO were parties to the Policy. The coverage clause was contained in Clause 7 of the Policy which provided:

2. [18]

   The relevant issue before the primary judge was whether Mr Mace’s claim (which was accepted to be a “Claim” for the purposes of the Policy) was a claim “resulting from” GEO’s conduct of the “Healthcare Services”.

3. [19]

   The definition of Healthcare Services in the Policy provided:

4. [20]

   The description of Healthcare Services in the Policy Schedule was as follows:

The decision of the primary judge

1. [21]

   The primary judge found that Mr Mace’s Corrective Services file, to which GEO had access in 2010, recorded that he had been in custody in 2008. During that period of incarceration, Mr Mace had committed a serious act of self-harm, requiring hospitalisation. He was then diagnosed and treated for schizophrenia.

2. [22]

   GEO accepted that it owed a duty of care to Mr Mace to ensure that the psychologists and counsellors it employed at Parklea assessed Mr Mace at the time of his admission. That duty could have arisen from its assumption of responsibility evidenced either by its contractual obligation to the State or by the systems it had put in place for the management of inmates at Parklea. As already noted, in these proceedings Vero accepted that the settlement GEO reached with Mr Mace was a reasonable one. Vero maintained, however, that the non-provision of counselling and psychological services by GEO to Mr Mace did not fall within the cover provided by the Policy.

3. [23]

   The primary judge set out her conclusions regarding the coverage provided by the Policy at [25] – [27]:

4. [24]

   The primary judge noted that her conclusion was “supported by the documents which govern GEO’s contractual obligations to provide those services to inmates at Parklea and the evidence as to the systems it put in place, in order to satisfy those obligations”.

5. [25]

   GEO’s contractual obligations were contained in an agreement with the State, as represented by the Commissioner for Corrective Services. Relevantly, the agreement obliged GEO to perform the services identified in GEO’s Tender Response in accordance with the operating specifications contained in the agreement.

6. [26]

   Clause 15 of the agreement provided that GEO was obliged to facilitate the provision of “Health Services” by Justice Health. Clause 15(d) acknowledged that both the Commissioner and GEO were party to a Health Services (Tripartite) Deed, which “may vary the terms of this Agreement in relation to the conduct of the Health Services”.

7. [27]

   GEO’s Tender Response specifically addressed the risk of self-harm for inmates, and the strategies, policies and procedures it would put in place for dealing with inmates with mental health issues. The Tripartite Deed dealt with the facilitation of “Health Services” which GEO agreed that Justice Health would provide. The primary judge found:

8. [28]

   The operating specifications in the Tripartite Deed expressly obliged GEO to assess the needs of inmates at risk of deliberate self-harm and those with mental illness. The primary judge concluded:

9. [29]

   The primary judge heard evidence from Mr Jones, a correctional manager, and Ms Azzopardi, a psychologist, regarding the operation of GEO’s reception system at the time Mr Mace was transferred to Parklea.

10. [30]

    Ms Azzopardi’s duties at that time included “assessment of inmates who are considered to be at-risk of suicide or self-harm and develop appropriate strategies for their management”. Ms Azzopardi gave evidence that at the time of Mr Mace’s transfer to Parklea, all inmates transferring into Parklea went through “a reception and induction process carried out by GEO staff…”.

11. [31]

    Mr Jones gave evidence that the standard “Incoming Escort Checklist” was completed for Mr Mace. He also gave evidence that the computer database that held inmate information included an alert/comment that:

12. [32]

    Mr Jones said that the system was that on arrival, the Incoming Escort Checklist would be used by staff in reception, to ensure that the inmate was placed in the correct area. Mr Jones explained that inmates identified to be at risk of serious mental illness or self-harm were referred to GEO psychologists and Justice Health staff. Alerts for medications such as methadone were also recorded and passed on to Justice Health, but not all medications were noted. Health assessments were conducted by Justice Health on the first day of arrival and GEO’s psychologists and counsellors were instructed to review all inmates the following day. Each inmate also had a separate case management team.

13. [33]

    The primary judge noted that, “There was no evidence of a record evidencing that Mr Mace had been assessed, as GEO was obliged to assess him, when he entered the centre for risks of self-harm as a result of his mental illness”.

14. [34]

    The primary judge concluded that GEO’s claim was covered by the Policy:

15. [35]

    The primary judge emphasised that the insuring clause addressed claims “resulting from the conduct” of the Health Services. This obligation went beyond the provision of services by a particular psychologist or counsellor to a particular inmate during an in-person consultation. It included claims which resulted from how GEO conducted the provision of such services, including their non-provision.

16. [36]

    The primary judge found that Mr Mace’s claims against GEO (which GEO pleaded back against Vero in the cross-claim) included a complaint of failure to undertake psychological assessment or to provide him with any Healthcare Services. That was a claim “resulting from” its “conduct” of the insured “Healthcare Services”. The primary judge concluded:

Grounds of appeal and notice of contention

1. [37]

   Vero’s notice of appeal comprised three grounds of appeal:

2. [38]

   Although in oral submissions Senior Counsel for GEO, Mr Cheshire SC, with whom Mr Newton appeared, submitted that the primary judge had made findings that GEO had in place a system whereby each inmate was subject to a psychological and mental health assessment by a GEO employee, for more abundant caution a notice of contention was filed in the following terms:

3. [39]

   Ground three of Vero’s notice of appeal emphasised the following findings of fact made by the primary judge and her Honour’s characterisation of Mr Mace’s claim (which was the only claim made by GEO against Vero):

   1. (1)

      there was no evidence that during the time that Mr Mace was on remand at Parklea from 3 to 7 March, he received any services from either the psychologists or the counsellors employed by GEO. Properly understood, his complaint was that he should have received such services, both on admission and subsequently, as it was only by providing such services that GEO identified inmates who were at risk of self-harm and took steps to manage that risk;

   2. (2)

      Mr Mace’s complaint, properly understood, was about GEO’s management of the operation of the Centre;

   3. (3)

      Mr Mace claimed that he was [a person at risk of self-harm while in custody] and that GEO had negligently failed to provide him with the services of psychologists and counsellors, as it ought to have done; and

   4. (4)

      there was no evidence that Mr Mace had been assessed, as GEO was obliged to assess him, when he entered the centre for risks of self-harm and as a result of his mental illness.

4. [40]

   Given those findings of fact, it was submitted that the primary judge erred in reaching the conclusions that:

5. [41]

   Vero submitted that the proper characterisation of Mr Mace’s claim against GEO was that:

6. [42]

   Vero submitted that the claim, so characterised, was not within the scope of the insuring clause.

7. [43]

   Vero submitted that whether Mr Mace should, or ought to have received the services of GEO’s psychologists or counsellors, said to be in issue by the primary judge, did not arise, because the evidence at the trial could not alter the nature of the claim earlier made by Mr Mace and settled by GEO, which was expressly limited to the non-provision of any services. It was that claim, and only that claim, which was repeated by GEO against Vero.

8. [44]

   Vero emphasised that this matter arose in the context of a policy which provided cover for part only of a wider business conducted by GEO at Parklea. Vero emphasised the definition of Healthcare Services which, it will be recalled was:

9. [45]

   It was submitted that this definition, which was emphatic in its limitation of the Healthcare Services covered by the Policy (“and no other”), was determinative in favour of Vero. This was because the claim, properly construed, was about the lack of coordination by GEO of the running of the prison at the point of admission of remand prisoners. GEO’s claim should thus be characterised as relating to GEO’s provision of custodial services, which was outside the scope of coverage under the Policy, which was limited to the provision of medical services and treatment, including services and treatment provided by psychologists and counsellors, “and no other”.

10. [46]

    Vero contended that GEO’s submissions sought to move away from what was pleaded below. It was submitted that GEO sought a “finding that medical employees of GEO in fact attended Mr Mace and that his loss arose out of their negligence”, however, that was not what Mr Mace claimed.

11. [47]

    Vero submitted that:

12. [48]

    Vero submitted that the contractual obligations of GEO to the State, while useful in providing context, did not form part of Mr Mace’s claim, and could not be used in interpreting the Policy.

13. [49]

    GEO submitted that Mr Mace’s case, which was repeated by GEO against Vero, was that if appropriate steps were taken by GEO’s psychologists and counsellors to manage Mr Mace’s identifiable risk of self-harm, he would not have suffered the loss and damage which he did.

14. [50]

    GEO submitted that the question of whether Mr Mace ought to have received psychological services went directly to the issue of whether Mr Mace’s claim “resulted from” the “conduct” by GEO of Healthcare Services, as defined. It was submitted that the “conduct” by GEO of Healthcare Services included the omission to provide such services in accordance with the system for the provision of Healthcare Services GEO had established.

15. [51]

    GEO emphasised that it was contractually obliged to provide inmates at Parklea with services of psychologists and counsellors. GEO’s failure to identify an inmate at risk of self-harm was an omission in the conduct of the Healthcare Services which GEO was providing.

16. [52]

    There was no dispute about the content of the relevant principles to be applied in construing GEO’s obligations under the Policy. Rather, the dispute was about the proper characterisation of GEO’s claim against Vero and the application of the relevant principles to the claim correctly characterised.

17. [53]

    In Vero Insurance Ltd v Australian Prestressing Services Pty Ltd [2013] NSWCA 181, Meagher JA (with whom Beazley P and Simpson JA agreed) summarised the relevant principles:

Consideration

1. [54]

   I have concluded that on a proper characterisation of GEO’s claim against Vero, and on the facts found by the primary judge which have not been challenged, GEO’s claim was one resulting from its conduct of Healthcare Services, as defined.

2. [55]

   The language of the coverage provision of the Policy, in the context of the other terms of that contract, favours the conclusion that the pleaded claim by Mr Mace against GEO, which pleading was repeated by GEO against Vero, was a claim “resulting from the conduct of the Healthcare Services”, as those terms are further defined in the Policy.

3. [56]

   An objective observer would conclude that the parties intended that the “conduct” of the Healthcare Services included an omission by GEO to provide Healthcare Services. Mr Marshall SC, who appeared with Ms Horvath on behalf of Vero, accepted that proposition, at least in part. He drew a distinction between the non-provision of services simpliciter and the non-provision of particular services as part of the overall provision of medical services and treatment:

4. [57]

   The conclusion that an omission to provide services fell within the definition of Healthcare Services in the Policy is supported by the other terms of the contract. The Policy included an “Aggregation of Claims and Fidelity Claims” clause which included the provision that “[a]ll claims arising out of, based upon, attributable to or in respect of a single act, error or omission or series of acts, errors or omissions consequent upon or attributable to one source or original cause shall be considered to be a single Claim and shall attract one Excess”. That clause, in identifying the circumstances of permissible aggregation under the Policy as extending to Claims in respect of an “omission” or “series of omissions”, provides support for a construction which identifies an omission to provide Healthcare Services as within the objective contemplation of the parties as being the “conduct” of Healthcare Services.

5. [58]

   It is correct, as Vero submitted, that the coverage it agreed to provide was subject to important limitations provided in the definition of Healthcare Services which in turn was limited to the Healthcare Services described in the Policy Schedule, and no other, of the Policyholder. Mr Marshall SC submitted:

6. [59]

   Contrary to the submissions made by Vero, however, coverage under the Policy was not limited to services provided or omitted to be provided in a physical consultation by GEO’s psychologists and counsellors with an inmate, but, in terms, encompassed "the provision of medical services and treatment”, including services and treatment provided by psychologists and counsellors.

7. [60]

   I accept Vero’s submission that the Policy should not be construed as providing coverage for GEO’s conduct in the provision of custodial services. If, on an analysis of GEO’s claim against Vero, it was correct to conclude that the claim should be understood as being that the custodial services provided by GEO caused Mr Mace to suffer loss and damage, that claim would not be within the coverage provided by the Policy.

8. [61]

   On the correct characterisation of this claim, however, GEO’s claim was a result of the conduct of the Healthcare Services; it arose directly from the faulty operation of the system GEO had devised and implemented to address the risks to the mental health of inmates, including Mr Mace.

9. [62]

   Contrary to Vero’s submission, each of the particulars of GEO’s negligence referred to in paragraph [13*] above (including (d), (e) and (h) relied upon in particular by Vero), with the possible exception of particular (a), meets the description of a claim resulting from the conduct of the Healthcare Services.

10. [63]

    GEO’s pleaded case was correctly understood by the primary judge as including a claim that the omission to provide Healthcare Services to Mr Mace arose from a failure of GEO’s healthcare systems, and was not simply a claim that GEO did not conduct Healthcare Services at all. The pleaded claim was directed to the non-provision of particular services to Mr Mace, being an assessment by a counsellor or psychologist, as part of the overall provision of medical services and treatment by GEO to inmates.

11. [64]

    Vero's case was that GEO's failure to have either a psychologist or counsellor assess Mr Mace upon his admission was not something which occurred in the conduct of Healthcare Services, as defined. This was because the omission to provide services did not occur in the course of a psychologist or counsellor physically providing a service to Mr Mace. The primary judge was correct to reject that submission. The insuring clause was broad enough to provide cover to GEO in circumstances where, by reason of a failure of GEO’s healthcare systems to identify Mr Mace as requiring assistance, he suffered loss or damage. This is because that omission, properly characterised, was a result of the conduct by GEO of Healthcare Services, namely the omission as part of the Healthcare Services GEO was otherwise providing to inmates at Parklea to identify Mr Mace’s risk of self-harm.

12. [65]

    Properly construed, the conduct of Healthcare Services by GEO involved more than acts and omissions of a particular counsellor or psychologist in the course of a consultation with a particular inmate. The “conduct” of Healthcare Services extended to acts and omissions in identifying and assessing inmates for the purpose of determining which further health services and treatments were required. This conclusion is sufficient to identify GEO’s claim in this case as one resulting from the conduct of Healthcare Services.

13. [66]

    Her Honour’s factual findings that GEO provided Healthcare Services at Parklea were amply supported. Those services were provided in order to identify and manage inmates who were at risk of self-harm while in custody at Parklea. The only findings challenged by Vero were the ultimate findings set out at [*40] above. While Vero relied upon a number of the primary judge’s findings to support its characterisation of the claim, those findings need to be read in context with the other findings of fact. The most important of those findings were as follows:

    1. (1)

       the findings regarding the nature of Mr Mace’s claim:

    2. (2)

       the positive finding that GEO had put Healthcare Services systems in place:

    3. (3)

       the finding that “Mr Mace claimed that he was [an inmate at risk of self-harm while in custody at the Parklea] … and that Geo had negligently failed to provide him with those services, as it ought to have done”: [27]

    4. (4)

       the finding made by the primary judge after her Honour's review of the various contractual documents, that:

    5. (5)

       the specific findings about the procedures devised to provide the Healthcare Services GEO had contracted to provide at Parklea:

14. [67]

    Those findings demonstrated that at the time of Mr Mace’s admission, GEO was engaged in providing Healthcare Services to inmates at Parklea and that the failure to assess Mr Mace was an omission in the course of provision of Healthcare Services to inmates. The claim resulted from the conduct of Healthcare Services. Her Honour was correct so to conclude.

15. [68]

    Having regard to these conclusions, it is unnecessary to address GEO’s notice of contention.

16. [69]

    For the foregoing reasons I propose the following orders:

    1. (1)

       Appeal dismissed;

    2. (2)

       Appellant to pay the respondents costs as agreed or assessed.