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Case summary: Workers Compensation Nominal Insurer v Sako [2025] NSWCA 12 – the uninsured liability scheme and dust disease claims

Published on March 14, 2025 by Tim Gauci

The recent case of Workers Compensation Nominal Insurer v Sako [2025] NSWCA 12 has considered whether the uninsured liability scheme extends to common law damages sought by claimants suffering from dust diseases when their employer was uninsured. The Court of Appeal has ultimately determined that the scheme applies strictly to workers compensation injuries and does not extend to dust disease claimants.

Background

In New South Wales, employers must have workers compensation insurance. To help injured workers whose employers do not comply, an uninsured liability scheme was created to ensure workers could obtain their statutory entitlements and bring a work injury damages claim.

Mr. Sako initiated proceedings in the Dust Diseases Tribunal against the Workers Compensation Nominal Insurer (WCNI), which was responsible for claims against three deregistered employers. Two of these employers were insured under WCNI’s workers compensation scheme but one, Harmes, was uninsured. Mr. Sako sought to amend his claim to argue that WCNI was liable for Harmes’ obligations under the uninsured liability scheme.

WCNI contested this, arguing that it was not an insurer as defined under the Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW) and that Mr. Sako had no legal right to access the uninsured liability scheme, as his claim related to a dust disease rather than a standard workplace injury.

The trial judge initially found the legal arguments to be sufficiently arguable and allowed Mr. Sako to amend his claim. WCNI then sought leave to appeal.

Since the appeal arose from an interlocutory decision, WCNI needed leave to appeal. The Court of Appeal granted leave, given the legal significance of the issue and its potential broader impact on litigation involving the uninsured liability scheme.

Legal analysis

Under section 140 of the Workers Compensation Act 1987 (NSW), (1987 Act) a claim upon the uninsured liability scheme is available for an ‘injury’ suffered by a worker of an uninsured employer, either for compensation or ‘work injury damages.’

However, section 4 of the 1987 Act defines ‘injury’ in a way that explicitly excludes dust diseases, which are covered under the Workers Compensation (Dust Diseases) Act 1942 (NSW) (1942 Act). Since Mr. Sako’s condition ‘silicosis’ falls under the 1942 Act, it does not qualify as an ‘injury’ under the 1987 Act, and therefore, he was ineligible for the uninsured liability scheme.

Similarly, the concept of ‘work injury damages,’ as defined in section 250 of the Workplace Injury Management and Workers Compensation Act 1998 (NSW), is contingent on an injury as prescribed by the 1987 Act. Because dust disease claims are handled separately and allow unrestricted common law damages, they do not meet the statutory definition of ‘work injury damages.’

Appeal arguments and decision

Mr. Sako argued that the uninsured liability scheme was intended to be a remedial measure benefiting all workers and that the legislation should be interpreted in a way that allowed him access to the scheme despite the unique treatment of dust disease claims.

WCNI argued by highlighting the historical distinction between dust disease claims and standard workplace injury claims, referencing the different compensation pathways provided under the 1942 and 1987 Acts. It pointed to the specific statutory wording that associates the scheme with ‘injuries’ under the 1987 Act, contending that if Parliament had intended for dust disease claimants to access the scheme, it would have explicitly stated so in section 140 of the 1987 Act.

The Court of Appeal unanimously supported WCNI’s stance, affirming that access to the uninsured liability scheme is strictly limited to claimants who suffer an ‘injury’ under the 1987 Act and who seek compensation or ‘work injury damages’ within that framework. The absence of any statutory reference to dust diseases in section 140 reinforced the Court’s conclusion that Parliament did not intend for dust disease claimants to benefit from the scheme.

Practical implications for claimants

Claimants with dust diseases, as defined by the Workers Compensation (Dust Diseases) Act 1942 (NSW), cannot use the uninsured liability scheme to seek damages from an uninsured employer. This differs from cases involving employers insured by entities that later became insolvent or deregistered, which are covered by a different scheme. Joint tortfeasors cannot claim contribution from the uninsured liability scheme either.

The Court of Appeal’s ruling clarifies:

• Dust disease claimants cannot access the scheme if their employer was uninsured.
• Joint tortfeasors cannot seek contribution from the scheme in these cases.
• Claimants must seek alternative legal options, as their rights remain under the 1942 Act, not the uninsured liability scheme.

The ruling in Workers Compensation Nominal Insurer v Sako underscores the clear statutory distinction between standard workplace injuries and dust diseases. While the uninsured liability scheme serves as an important safety net for workers compensation claims, it does not extend to dust disease claimants. Plaintiffs pursuing common law damages for dust diseases must be aware of these limitations when facing an uninsured employer.

Please note that this article does not constitute legal advice. If you are seeking professional advice on any legal matters, you can contact Carroll & O’Dea Lawyers on 1800 059 278 or via our Contact Page and one of our lawyers will be able to assist you. If you or a loved one have been injured, use our Personal injury Claim Check now.

Disclosure and important note: This article is based on our own legal research and thinking. Some of its content has been generated with the assistance of artificial intelligence. The authors have checked and approved this article, including the AI generated content, for publication.