(The Motor Accident Injuries Amendment Bill 2013)
Effect on 90% of Accident Victims Injured by a Driver at Fault (Not Over 10% Whole Person Impairment)
Before Proposed 2013 Changes:
After Proposed 2013 Changes (Summary of Major Changes):
Effect on 10 % of Accident Victims Injured by a Driver at Fault (Over 10% Whole Person Impairment)
Before Proposed 2013 Changes:
After Proposed 2013 Changes:
Long Summary and History
As the Motor Accidents Authority website notes, compulsory third-party insurance has existed in New South Wales since 1942 – that is for 70 years. The scheme was created so that when a road user was injured by a negligent driver, there would be an insurance fund available to cover the damage suffered. This was to address the problem that many drivers didn’t have insurance nor did they have sufficient assets to make good the damage which they had caused.
In 1987 the Unsworth government removed the right to claim damages for those injured in motor vehicles. In 1988 the Greiner government restored the right to claim damages on the recommendation of the Transcover Review Committee chaired by John Dowd.
As in 1942, it is still the case that for most people the most dangerous place they encounter is the road. Heavy fast moving motor vehicles can do enormous damage to the human body. There is a limit to what the medical profession can do. Most people have a mortgage or pay rent and the financial security of the family depends on the breadwinner being able to work. Few people have spare resources to meet substantial medical bills or to pay carers.
By taking great care when we venture onto the road we can generally ensure that we and our family don’t get injured. Except for one thing. We can’t control the other driver – the negligent or dangerous driver who puts our lives and limbs at risk.
Compulsory third-party insurance was designed to provide all road users with peace of mind that there would be a fund available if they were injured by that negligent driver.
And if agreement could not be reached with the insurer – which ultimately happens in the vast bulk of cases – then the amount payable could be determined by an independent umpire.
Because of criticism of the cost and delay involved in going to court, for many years in New South Wales disputes have been resolved by a CARS assessor, appointed by the Motor Accidents Authority. These assessments generally take no more than half a day; they are handled in an informal way without cross examination of witnesses – without any of the formalities of a court hearing. These assessments are effective and there are very very few appeals to the court.
Except for the brief period of 18 months in 1987/1988, all road users in New South Wales have had this protection. And even during the period 1987/1988, the alternative statutory benefits under Transcover included weekly compensation for the whole of life to cover long-term disability.
Present Proposal – abolition of right to sue
The Motor Accident Injuries Amendment Bill 2013 (the “Bill”) abolishes the right to sue for 90% of accident victims. The Bill says that this applies to those who do not have more than 10% whole person impairment. However the whole scheme is designed to ensure that 90% of accident victims never reach that threshold.
That is the stark reality. 90% of accident victims will lose the right to sue.
Instead they are given much more limited statutory benefits. Most importantly, instead of being able to sue for loss of earnings and medical expenses for the whole of their lives, they are restricted to claiming weekly compensation and medical expenses for five years from the date of the accident.
Even under Transcover in 1987, accident victims could claim weekly compensation and medical expenses for the whole of their lives. Under section 86 of the Transport Accidents Compensation Act 1987, accident victims were entitled to weekly compensation until “the date on which the earner would have permanently left the workforce.”
Restrictions on compensation for Loss of Earnings:
Compare all of this to the existing system where damages are simply assessed by working out what the actual effect is on earning capacity – with no arbitrary rules and restrictions.
Treatment and Care:
Reasonable costs of care are payable but for 90% of accident victims this will cease five years from the date of the accident – even if the medical problems didn’t arise until years after the accident, as sometimes occurs.
There is no longer any compensation for care provided without charge by family members or friends. This simply means that accident victims will be more likely to seek paid assistance rather than rely on the charity of their family or friends.
There is a particularly nasty provision – s.65ZH(4) – which says that a Dr, physiotherapist etc cannot recover from an accident victim the cost of treatment and care if it exceeds the amount fixed under the government guidelines. On the face of it, this sounds like a provision which will protect accident victims from unreasonable medical cost.
In fact what this means is that an accident victim cannot pay a doctor or other health provider out of his or her own pocket for medical treatment more than the guidelines provide. So, if the guidelines provide that the maximum amount payable for physiotherapy is $1000, then it will be illegal for accident victims to have more physiotherapy once $1000 has been spent (even if they want to pay for it out of their own pocket) – unless they can find a physiotherapist who is prepared to work for free. This sort of provision has no place in a democratic society. It is much the same as the proposed fixing of maximum legal costs.
90% of accident victims will still receive no compensation for pain and suffering or permanent disability. This has been the case since 2002 so it is no different.
However the 10% of accident victims whose injuries are so serious that they get over the 10% whole person impairment threshold presently have their general damages determined by a CARS Assessor (and occasionally a court) on the basis of how their lives have been affected by the accident. That will no longer be the case. There is now a scale.
For those assessed as being:
The amount gradually goes up from there but only a tiny percent of accident victims are ever assessed at more than 25% whole person impairment. The amounts set out in the scale above are much less than would presently be recovered as general damages.
By definition these restrictions only apply to accident victims who are above 10% whole person impairment. Accordingly these figures are only relevant to innocent accident victims when they redeem their claim and they will have to give credit for the amount received when they recover damages which are not restricted by these scales.
One of the problems with the new scheme is that 90% of accident victims will be receiving weekly benefits when long experience shows that accident victims much prefer to receive a lump sum. The problem with weekly benefits is that the accident victim has to be constantly convincing the insurer that he or she is still entitled to benefits and most people become sick of the continuing arguments, of payments being stopped and payments just not being made when they were due.
Also insurance companies much prefer to pay a lump sum because monitoring payment of weekly benefits on a long-term basis to large numbers of people just becomes too expensive.
So the new scheme provides that the accident victim can be paid a lump sum instead of receiving weekly benefits. This can happen either with the acceptance of the accident victim or even without the acceptance of the accident victim if it is approved by a claims assessor.
So the 90% of accident victims most radically affected by the proposed changes can still get a lump sum. The problem is that the lump sum will now be calculated on the basis of what benefits would be received during the remainder of the period of five years. So if rights are deemed two years after the accident, the lump sum will be calculated on the basis of three years weekly benefits.
Most people who redeem their rights for a lump sum under the new scheme will therefore receive a small percentage of what they would presently receive, because under the existing system a lump sum is calculated on the basis of lifetime loss of earnings and medical expenses – instead of on the basis of two, three or occasionally four years under the proposed scheme.
The scheme in fact envisages that claims are intended to be redeemed for a (greatly reduced) lump sum because if an accident victim is still receiving benefits after two years and the claim has not been resolved then it has to be referred to a costs assessor. The costs assessor can amongst other things make a determination that the claim be redeemed in an amount which the assessor thinks is fair.
Dispute Resolution and Costs:
Any argument with the insurer has to be first determined by an internal review made by the insurer itself. In most cases the insurer will have to make that decision within 21 days.
If the accident victim doesn’t like the result of that internal review – which will probably be most of the time – the accident victim has only 30 days to refer the dispute to a claims assessor. Alternatively the accident victim can within that same 30 days ask a new body called the Independent Review Officer to review the decision.
The problem is that a claims assessor can only order payment of legal costs if the accident victim is a child or otherwise under a legal disability or if there are exceptional circumstances.
Otherwise no legal costs can be recovered from the insurer.
Furthermore payment of legal costs by the accident victim is only permitted if allowed by regulations still to be passed. And if regulations are passed permitting payment of legal costs, the regulations will no doubt set a maximum.
So what does all this mean? It means that there are very strict time limits on challenging the insurer’s decision. There will no doubt be prescribed forms which will have to be carefully completed to make sure that they comply – because otherwise the challenge will be out of time.
Most accident victims won’t be able to afford a lawyer because they won’t be able to recover the cost which would have to be paid out of their own benefits. This is a great outcome for the insurers because they have experienced staff and unlimited access to lawyers. They know that when they are negotiating with accident victims who don’t have legal representation they end up paying a lot less money.
And even if an accident victim can afford to pay a lawyer out of his or her own pocket, the regulations will fix the maximum the lawyer can charge which actually means the maximum amount of hours the lawyer can spend on the matter and still get paid. So this means that even a comparatively well off accident victim will only have limited access to a lawyer – because the regulations which fix the maximum fees will effectively also fix the maximum amount of time that a lawyer can spend on the matter.
For 90% of accident victims, this will now be a no-fault scheme. That means that the driver who caused the accident will have equal rights with his or her victim. But there is only the same premium pool of money to be shared around – in fact it is to be a lower pool of money because the government is proposing to reduce premiums by about 15%.
So not only will the amount of money available to innocent accident victims be reduced by the proposed premium reductions, it will be slashed so that in 90% of cases the person caused the accident will have equal rights.
In other words innocent accident victims are expected to fund a no-fault scheme for those who caused their injury.
The only drivers who will miss out on the no-fault scheme will be those guilty of a serious driving offence which includes mid-range or high range PCA.
Jurisdiction of CARS:
Decisions of CARS Assessors will now be final and binding. Up until now accident victims have had the right to appeal from decisions of CARS Assessors to a judge. That rarely happens in practice because generally speaking CARS Assessors are experienced practising lawyers – some who traditionally act for accident victims and some who traditionally act for insurers – and their decisions are usually regarded as being fair.
However CARS Assessors are appointed by the Motor Accidents Authority which in turn is answerable to the government. It would be quite easy for a government which wants to reduce damages to ensure that the Assessors appointed are people who would toe the government line. In those circumstances the right of appeal to the Court would become important because it would be a brake on Assessors acting unfairly.
Accordingly the loss by all accident victims – not just the 90% – of ultimate access to the court is important and should be resisted.
Claims Procedures for Statutory Benefits:
There are all sorts of technical requirements in order to obtain benefits. A lot of accident victims are likely to lose rights because of failure to comply with these technicalities, particularly given their limited access to legal assistance – see Dispute Resolution and Cost above.
The restrictions include:
There is a provision that if the insurer unreasonably denies liability then the legal costs payable to the accident victim can be increased by up to 25%. That however is meaningless because – as indicated above – the accident victim cannot recover legal costs.
Right to Sue:
As indicated above, only 10% of accident victims (those over the 10% whole person threshold) will be able to sue to recover damages for negligence.
Even that 10% will have their rights severely restricted. As indicated above, general damages for pain and suffering and permanent disability can no longer be assessed based on the individual impact on an accident victim. The loss of a finger is far more important to a concert pianist than to a labourer but they will both recover the same amount – and it will be a lot less than they would get at the moment.
Their right to claim for economic loss will also be restricted to those items permitted by “Part 5.2″. As there is no “Part 5.2″ in the draft Bill, we don’t know what the restriction is.
Costs in Damages Claims:
Since 2002 there has been power for the government by regulation to fix the maximum costs payable by someone suing for damages. Although there is a regulation which fixes maximum costs, in practice this has little application because accident victims can enter into a contract with their lawyer which is not bound by the maximum.
There is now a new provision which allows the government to fix maximum costs by reference to the amount recovered.
Critically important is the very last provision in the Bill which abolishes the right of an accident victim to contract out of the very restrictive costs scale. This effectively means that the maximum amount a law firm can charge for costs and expenses is 2% of the verdict. For an accident victim who recovered $150,000 for example this would mean maximum costs of $3000 including expenses. As the expenses would normally exceed $3000, effectively this means that the accident victim would not be able to have legal representation.
For an accident victim who recovers $3 million the maximum costs would be $60,000. However in such a big case the cost of expert evidence may very well exceed $60,000. In addition there is an enormous amount of time required to run such a large case. It would simply not be viable for a law firm to run such a case except on a very very limited budget in terms of time expended an expert evidence used. The end result of the accident victim is that the amount recovered is likely to be a fraction of his or her true entitlement.
The harshness of these restrictions is to be compared to the insurer which has absolutely no limits on the amount of expense in the defence of the claim both from in-house lawyers and from law firms which it engages.
Restricting maximum costs is an extraordinarily effective way of reducing the damages which an accident victim will recover because their lawyer won’t be able to prepare the matter properly – assuming a lawyer can be found to take the case in the first place.
It would be the same if the government fixed the maximum which a plumber could charge. The plumber would spend the amount of time for which he was being paid and then walk away whether the problem was fixed or not.
Restricting maximum costs which can be paid sounds like an attack on lawyers but it’s actually an attack on the rights of accident victims. The government shouldn’t tell you how much you can pay your plumber nor should it tell you how much you can pay your lawyer.
The justification claimed for these drastic attacks on the rights of innocent accident victims is that premiums will come down. There can be no certainty that this will happen because this no-fault scheme is a brand-new scheme and it’s hard to estimate how many people will be making claims. If experience is any guide, new claimants will be low in the first year and will gradually ratchet up as more and more negligent drivers realise that they can make a claim.
Because of that uncertainty there is a special provision for premiums during the transition period of three years.
S.46(1)(a) says that the premium guidelines are to make provision for the “adjustment of premiums” to avoid transitional excess profits and transitional excess losses.
So if the insurers declare that they have made too much money premiums can be adjusted downwards – one might think that not very likely. If on the other hand the insurers declare that they have lost money than premiums can be increased.
This rather suggests that there is no certainty that premiums will come down at all once these adjustments are made.