Legal Briefing

Number 60

31 July 2001


Since its inception on 1 July 1998 Comcover has been a vital part of the Commonwealth Government. Comcover is the Commonwealth's self managed fund for insurable risks. Generally, unless Commonwealth departments and agencies are insured, they will have to meet losses and liabilities, including the costs of defending claims against them, from their normal running costs. This represents a fundamental shift from the previous regime. This briefing addresses the previous regime, the reasons for the change and the way the current regime operates. The briefing concentrates on aspects relating to coverage for legal liabilities, as this is the area of greatest effective change.

The Previous Regime

The previous regime dated back to 1909. Sometimes it was called a self-insurance regime. More accurately, it was a non-insurance regime. In particular, funding for departments' legal liabilities, and for most related legal expenses, was available from a Compensation and Legal Expenses appropriation. That appropriation was separate from appropriations for departments' running costs and, in practical terms, constituted an inexhaustible supply of funds for legal liabilities and expenses. There was no single body responsible for administering the regime.

The rationale for the previous regime was that the Commonwealth's size and resources enabled it to bear its own losses. Another, but not insurmountable, factor was that money paid to departments was (and generally still is) required to be paid into the Consolidated Revenue Fund. Thus, despite paying premiums for insurance, departments could not generally keep the proceeds of an insurance pay-out.

The main benefit of the previous regime was that the Commonwealth paid no commercial insurance premiums (which of course include a profit component for the commercial insurers).

However, the previous regime involved:

  • no general oversight of the cost to the Commonwealth of legal liabilities incurred by departments
  • very little planning for management of potential liabilities, and
  • very little incentive for departments to take steps to reduce their liabilities.

Reviews of the Previous Scheme

The non-insurance regime had been regularly reviewed and endorsed since 1909, and as recently as 1981 and 1990. However, during the latter part of that period there were progressive moves towards devolution of authority, requiring managers to operate more commercially, and making managers more accountable. Also, state governments, and various Australian and overseas commercial corporations, were generally moving towards internal self-managed insurance funds.

In 1997 a further review was commissioned. The review team comprised officers from the Department of Finance and the Insurance and Superannuation Commission. That team was oversighted by a Steering Committee chaired by the Department of Finance and comprising officers from the Australian National Audit Office, the Attorney-General's Department and the Australian Government Actuary. Following the report of that review, the Government decided to establish the Comcover regime.

The Comcover Scheme

Its Features

The Comcover scheme was established on 1 July 1998. The scheme is an administrative scheme, not established under legislation. Features of the Comcover scheme include:

  • an insurance fund separate from Consolidated Revenue, was established under section 20 of the Financial Management and Accountability Act 1997
  • the fund is managed by a small unit (called 'Comcover') within the Department of Finance and Administration
  • Comcover's performance is monitored by an Advisory Board
  • Comcover has outsourced provision of its member services, eg. claims management and payments
  • eligible fund members include all Commonwealth General Government Sector Organisations - that is, those covered by the Financial Management and Accountability Act 1997 and the Commonwealth Authorities and Companies Act 1997 - but excluding Public Trading and Financial Enterprises: CGGS organisations are listed in the Consolidated Financial Statements on the web site of the Department of Finance and Administration
  • for those eligible, membership of Comcover is compulsory, unless specifically exempted by the Minister for Finance and Administration
  • fund members pay premiums to Comcover and receive from Comcover its policy manual and a specific Schedule of Cover
  • Comcover provides broad cover for all classes of normally available general insurance, eg. general liability and professional indemnity, directors' and officers' liability, property loss, destruction or damage, business interruption and consequential loss, motor vehicle loss, destruction or damage, personal accident, official travel overseas, personal effects: Comcover also provides cover for a number of special risks, eg. marine and aviation liability, for members requiring that cover
  • if Comcover makes a payment in relation to a claim Comcover will then be subrogated to any rights of the fund member to recovery against a third party
  • if a fund member disagrees with Comcover in relation to a matter under the policy (eg. regarding the defence or settlement of a claim), the disagreement is to be referred first to a mutually agreed mediator, then to the Secretary of the Department of Finance and Administration and the CEO of the fund member or their nominee, and ultimately to the relevant Ministers
  • Comcover bears some of the insurance risk itself but takes out external commercial re-insurance for most of the risk
  • Comcover (through its outsourced claims management provider) manages claims covered by its insurance, although external commercial re-insurers may become involved in some circumstances
  • the Compensation and Legal Expenses appropriation has ceased to exist (thereby leaving a department to meet its liabilities and losses from insurance, running costs, or from any additional appropriation which the department can persuade the Government to support).

Its Benefits

The benefits of the Comcover scheme include:

  • fund members, and the Commonwealth's budget, are protected from unexpected insurable losses
  • there is greater transparency and accountability in the management of the Commonwealth's insurable risks
  • Comcover's whole of government approach to external commercial re-insurers enables insurance premiums to be kept as low as possible
  • there is a greater capacity to attain a coordinated and uniform approach to claims against the Commonwealth and to adopt more coordinated risk management policies and practices to reduce the number of such claims.

Comcover as a Government Entity

As indicated, Comcover is part of the Department of Finance and Administration. Accordingly, Comcover is bound to deal with claims in accordance with the Legal Services Directions issued by the Attorney-General under the Judiciary Act 1903.

Comcover has entered into arrangements with its key re-insurers ensuring that claims covered by its external commercial re-insurance are also dealt with in accordance with those Directions. Under those arrangements, Comcover manages claims.

Fund Member Obligations

Apart from paying premiums, important obligations on fund members include:

  • to disclose to Comcover all matters relevant to a decision by Comcover to offer cover, and to update Comcover on any significant change to the fund member's risk exposure during the period of the insurance (including the granting by the fund member of contractual indemnities) - as this is a condition of cover, Comcover may reduce its liability in respect of any claim affected by such a failure to disclose: NB - contractual indemnities by the Commonwealth should be granted only in accordance with the Finance Circular 1997/06
  • to inform Comcover immediately of any claim covered by Comcover, or of any event that might lead to such a claim, and to comply with incident recording obligations - in relation to liability insurance and directors' and officers' insurance, Comcover can refuse to indemnify a fund member in relation to claims made against the fund member within a period of cover that are not notified within 30 days of the expiry of the period of cover - initial notification may be by a telephone call or other convenient means of communication but should be followed up by completion of a Comcover claim form
  • with Comcover's assistance, to maintain effective risk management strategies
  • to advise Comcover if any risk placed with Comcover is also covered by another insurance policy: in that event Comcover would enter into discussions with the fund member for the orderly cessation of the other insurance policy
  • to comply with all conditions relating to events covered by Comcover insurance, for example:
    • refraining from making any statement to possible claimants or witnesses to an incident, or taking any action, that could be construed as an admission of liability, without Comcover's prior written approval - if liability is admitted without Comcover's prior written approval Comcover is entitled to refuse indemnity
    • taking all reasonable steps to provide assistance to an injured prospective claimant
    • obtaining details of witnesses to an incident
    • where possible, taking photographs or videos, or making sketches, of incident scenes
    • where appropriate immediately reporting incidents to the police
  • not to disclose, without the prior consent of Comcover, the nature and limit of the liabilities covered
  • if an operation is established, whether temporarily or permanently, outside Australia, to obtain any insurance required by local law to carry out operations in that particular jurisdiction
  • as fully as possible to cooperate with and assist Comcover in dealing with claims covered by Comcover insurance.

If a fund member's employee is sued (either on his or her own or with the Commonwealth or relevant government agency as a co-defendant) it is for the fund member, rather than Comcover, to determine whether the employee should be indemnified in relation to the claim (including the costs incurred in defending the claim).

In relation to officials employed in agencies covered by the Financial Management and Accountability Act, the decision whether to indemnify an official will be made under the scheme embodied in Appendix E to the Legal Services Directions regarding Commonwealth assistance to officials.

It is important that member agencies keep Comcover informed of decisions to indemnify employees as those decisions can affect how Comcover responds to a claim.

Although the relationship between Comcover and many of its fund members is not one to which the Insurance Contracts Act 1984 applies, Comcover is likely to act consistently with the Act in determining whether to deny coverage on the basis of a failure of a fund member to fulfil its obligations.

By way of illustration, the Act provides that where an insurer would, but for the Act, be entitled to refuse to pay a claim by reason of certain acts of the insured, the insurer cannot refuse to pay the claim but the insurer's liability will be reduced by the amount that fairly represents the extent to which the insurer's interests were prejudiced as a result of the insured's acts (section 54).

Exclusions from Insurance Cover

Exclusions from Comcover insurance cover include:

  • merits or judicial review of administrative action
  • fine, penalties, punitive, exemplary or aggravated damages
  • liquidated damages or performance warranties (unless liability would have arisen in any event)
  • loss of revenue due to false claims being made under legislation
  • appearing before an inquiry, except where covered under directors and officers' liability insurance
  • liability arising from:
    • the disregard of members and their employees of the need to take all reasonable steps to avoid losses
    • ionising radiation
    • asbestos
    • illegal acts
  • a claim arising from:
    • war
    • most cases of confiscation, nationalisation, requisition or damage to property ordered by a government authority
    • the discharge of pollutants unless sudden, identifiable, unintended, unexpected and accidental.

Legal Representation

Once Comcover accepts a claim, Comcover becomes the agency responsible for the management of the claim, including for the defence and settlement of the claim and any litigation relating to the claim. In most cases, Comcover will use its member agency's lawyers or lawyers from the member agency's legal panel. Comcover's responsibility includes developing appropriate strategies for the defence and settlement of claims in consultation with the member agency concerned and the Office of Legal Services Coordination in the Attorney-General's Department (which is responsible for administering the Attorney-General's Legal Services Directions).

Conflicts of Interest

Comcover does not favour denying claims because of overly technical interpretations of its policy manual. However, until Comcover has had the opportunity to consider a claim and has accepted that the claim is covered by its insurance, there is a potential for Comcover and its fund member to have a conflict of interest, ie. if a dispute arises as to whether the claim is covered by the insurance or whether the fund member has met a condition of the insurance policy. This potential exists in relation to any insurer and cases of actual conflict seldom arise. However, if a lawyer has already been engaged by the fund member to advise the fund member in relation to a claim, that lawyer would, without the fund member's agreement, be precluded from advising Comcover whether the claim was covered by Comcover insurance. Corresponding issues could arise if a lawyer has previously advised Comcover and is asked to advise the fund member.

Comcover is aware of the potential for conflict and seeks to manage it with a view to making the claims management process as smooth as possible and preserving a good working relationship with its fund members. One measure which assists to avoid the issue, and which also meets fund members' obligations under the Comcover scheme, is for fund members to refer claims immediately to Comcover without having first obtained legal advice in relation to the claim. That course would assist Comcover to meet its commitment to use fund members' choice of lawyer(s) on most occasions.

Members' Involvement

Once Comcover takes over the conduct of a claim it is responsible for the resolution of the matter and is required to meet the associated legal costs as it retains the legal services needed for that process. Accordingly, as the lawyer will be instructed by Comcover, the member will not necessarily have unfettered access to that lawyer. Rather, prior to the lawyer providing information to the member, it is likely that the lawyer will need Comcover's consent to release that information. Nonetheless, Comcover is acutely aware of the need for members to be involved in and fully informed of the progress of claims and attempts to meets members' expectations and reasonable requirements to the extent possible.

For further information please contact

Andrew Hughes of our Canberra office on telephone (02) 6253 7416 or e-mail, or any of the following lawyers:


Louise Vardanega

(02) 6253 7276


Andrew Berger

(02) 6253 7405


Simon Konecny

(02) 9581 7585


Martin Bruckard

(03) 9242 1386


Barry Cosgrove

(07) 3360 5647


Paul Shanahan

(08) 9268 1117


Sarah Court

(08) 8205 4231


Rick Andruszko

(08) 8943 1400


Peter Bowen

(03) 6220 5474

For enquiries regarding supply of issues of the Briefing, change of address details etc, tel: (02) 6253 7052 or fax: (02) 6253 7313 or e-mail:

ISSN 1448-4803 (Print)
ISSN 2204-6283 (Online)

The material in this briefing is provided for general information only and should not be relied upon for the purpose of a particular matter. Please contact AGS before any action or decision is taken on the basis of any of the material in this briefing.

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