Commonwealth, State and Territory Ministers and the President of the Australian Local Government Association (the Ministers) met today in Perth to discuss ongoing reforms to improve the availability and affordability of liability insurance.
The meeting was the fifth of a series of highly successful meetings held over the course of the past year which have resulted in all Australian jurisdictions agreeing to a landmark package of negligence law reform.
Professional Indemnity Insurance
A major focus of the meeting was a discussion of the difficulties faced by all professionals in obtaining professional indemnity insurance at a reasonable price.
Proportionate Liability
Ministers agreed to task the Heads of Treasuries Insurance Issues Working Group (IIWG) to work urgently towards developing a nationally consistent model for proportionate liability for economic loss. The Commonwealth re-affirmed that it will amend the Trade Practices Act 1974 and the Corporations Act 2001 to ensure that proportionate liability applies in both State and Federal jurisdictions.
The changes will mean that defendants will each only be liable to the extent that they have contributed to a plaintiff's economic loss.
Professional Standards Legislation
Ministers agreed that professional standards legislation should result in significant benefits for consumers by requiring professionals to comply with rigorous standards of risk management and to take out compulsory levels of insurance.
There was strong support amongst jurisdictions to progress nationally consistent professional standards legislation.
Ministers instructed the IIWG to report quickly on implications and mechanisms for developing a nationally consistent approach to professional standards legislation.
The Commonwealth will support an approach to professional standards legislation by amending the Trade Practices Act 1974 and other relevant Commonwealth legislation.
Professional Indemnity Insurance for Doctors
The Commonwealth advised that legislation had been passed by the Parliament to ensure that professional indemnity insurance for doctors is offered within the same prudential and legal framework as other types of professional indemnity. This legislation will take effect from 1 July, 2003.
Ministers considered the concerns of doctors about claims which may arise in excess of indemnity limits. Ministers noted that these concerns arose as a result of doctors moving from the previous `unlimited discretionary' model to the new arrangements which will provide doctors with legally enforceable contracts of insurance.
Ministers agreed that reforms to the standard of care, limitations periods and caps/thresholds on damages as agreed at previous meetings were essential to addressing these concerns and agreed to implement these reforms as soon as possible.
Ministers noted that the problems facing doctors with respect to claims above indemnity limits were not substantially different to the position of all other professional groups.
Recommendations of the Australian Health Ministers' Advisory Council (Neave Report)
The Ministers agreed to task the Insurance Issues Working Group, in conjunction with representatives of the portfolios of Health and Attorneys-General, to consider recommendations of the Australian Health Ministers Advisory Council (the Neave) Report, dealing with a range of issues outside the terms of reference set for the Ipp Report.
The Neave Report recommendations to be examined deal with: improving courts' usage of expert witnesses; improving alternative dispute resolution processes; increasing incentives for plaintiffs to accept injury mitigation services offered by defendants; preventing early re-payment of costs by medical practitioners being used as evidence of an admission of liability; and examining possible reforms to Commonwealth/State/Territory assistance programs to improve efficiency and transparency.
Trade Practices Act
The Commonwealth confirmed that it had made significant progress toward amending the Trade Practices Act 1974 in accordance with its commitment to underpin State and Territory law reform.
Impediments in the Trade Practices Act 1974 to providers of recreational services implementing effective waivers were removed late last year with the passage of the Trade Practices Amendment (Liability for Recreational Services) Act 2002.
The Trade Practices Amendment (Personal Injuries and Death) Bill 2003 was introduced into Parliament on 27 March 2003. When passed this legislation will prevent individuals and the Australian Competition and Consumer Commission (ACCC), in a representative capacity, from bringing actions for damages for personal injury and death due to a contravention of Division 1 of Part V of the Trade Practices Act 1974.
The Commonwealth advised that a further tranche of amendments to the Trade Practices Act 1974 will be introduced during the Winter Parliamentary Sittings to underpin State and Territory amendments to damages and limitation periods.
Long Term Care for the catastrophically injured
Ministers noted the progress report of the Insurance Issues Working Group taskforce. Ministers requested that officials expedite the work currently in hand in establishing a high integrity data set as a basis for potentially considering a national long term care scheme for the catastrophically injured.
Benefits to flow to consumers
Ministers emphasised the importance that benefits generated by the many civil liability and other reforms implemented should flow through to lower premiums.
Ministers noted that the ACCC will issue a further price monitoring report in June.
The Commonwealth indicated that if necessary it will review the extent of the ACCC's powers, including more formal processes, if it becomes clear that cost savings are not being passed on to consumers.
Ministers also agreed that officials should work with insurers to identify opportunities for further harmonisation of tort law reform. In view of the state of the reform process so far, Ministers expect that the Community Care Underwriting Agency group scheme should be extended to all States and Territories.
Other Issues
Ministers also discussed a number of particular issues including protections afforded to emergency service operators, the need for appropriate disclosure by brokers of renewal terms, the operation of section 54 of the Insurance Contracts Act 1984, and taxes on insurance.
Forward work plan
Ministers noted the significant contributions of all States and Territories to date in progressing reforms to improve the affordability and availability of public liability insurance, as set out at Attachment A. All Ministers confirmed their ongoing commitment to further reform.
Ministers agreed that the Heads of Treasury Insurance Issues Working Group be tasked with the following:
- A study of the logistical arrangements required for the implementation of nationally consistent professional standards and proportionate liability models.
- Review of the Neave Report recommendations, in concert with Health and Attorney-General representatives, and how they could serve to complement tort law reform already undertaken by States and Territories.
- Continue work on compiling a comprehensive data set in relation to long term-care costs.
- Consideration of opportunities for further harmonisation of tort law reform in conjunction with insurers.
Ministers agreed to reconvene in June in Adelaide to consider professional standards legislation and proportionate liability reforms.
ATTACHMENT A
COMMONWEALTH
- The Taxation Laws Amendment (Structured Settlements and Structured Orders) Act 2002 was enacted on 19 December 2002 to remove tax barriers to structured settlements.
- The Trade Practices Amendment (Liability for Recreational Services) Act 2002 was enacted on 19 December 2002. This Act seeks to amend the Trade Practices Act 1974 to allow people to sign waivers and assume the risk of participating in inherently risky recreational activities.
- The Commonwealth Volunteers Protection Act 2002 was given Royal Assent on 24 February 2003. This Act exempts Commonwealth volunteers from liability.
- The Trade Practices Amendment (Personal Injuries and Death) Bill 2003 was introduced into the Parliament on 27 March 2003. This Bill prevents individuals, and the Australian Competition and Consumer Commission in a representative capacity, from bringing actions for damages for personal injuries or death resulting from contraventions of Division 1 of Part V of the Trade Practices Act 1974.
- The Productivity Commission released its benchmarking study into Australian insurers claims management practices against world standards on 23 January 2003.
- The Minister for Revenue and Assistant Treasurer released the Review of the Law of Negligence on 2 October 2002. This review was jointly established with the States and Territories and reported on a range of issues including:
- professional negligence;
- reform of the TPA;
- limitation periods and reforms to assist not-for-profit organisations;
- limiting the liability of public authorities;
- self assumption of risk to override common law principles;
- proposals to restrict the circumstances in which a person must guard against the negligence of others; and
- the replacement of joint and several liability with proportionate liability.
- The Australian Competition and Consumer Commission (ACCC) has released their second report assessing the effect reforms have had on premiums and whether cost savings are being passed on to consumers.
- The Australian Prudential Regulation Authority (APRA) is conducting work on establishing a national claims data set.
- The Attorney-General, through the Standing Committee of Attorneys-General (SCAG), is pursuing legal system reforms.
NEW SOUTH WALES
- New South Wales enacted the Civil Liability Act 2002 in June 2002. This Act introduced:
- upper limits for non-economic loss ($350,000) and lost earnings (three times New South Wales' average weekly earnings);
- the application of a threshold of 15 per cent impairment in respect of general damages;
- new interest calculations (10 year bond rate or as determined by regulation) and discount rates (5 per cent unless prescribed by regulation) for damages awards;
- the abolition of punitive, exemplary and aggravated damages;
- limits on recovery for gratuitous attendant care;
- legal costs claims limited to the greater of 20 per cent of damages or $10,000 in small claims;
- penalties for making unmeritorious claims; and
- costs can be awarded on an indemnity basis for costs incurred after the failure to accept an offer of compromise.
- The Civil Liability Amendment (Personal Responsibility) Act 2002, which was enacted in November 2002, includes:
- waivers and voluntary assumption of risk;
- peer acceptance defence for professionals;
- establishing a realistic duty of care;
- protection for volunteers and `good Samaritan';
- structured settlements;
- ensures that saying `sorry' does not represent an admission of guilt;
- limits claims for nervous shock;
- drugs and alcohol to be taken into account in assessing negligence;
- proportionate liability for economic loss;
- prohibition of damages recovery if injured person engaged in criminal activity; and
- new limitation periods for personal injury cases.
- New South Wales has restricted the content of legal advertising. It has halved the stamp duty on general insurance, including public liability insurance, to five percent from 1 August 2002. New South Wales has provided funding to establish a group buying and risk management facility for not-for-profit bodies.
VICTORIA
- On 2 April 2003 the Victorian Government announced that it will implement most of the Ipp Report recommendations, with some modifications. In particular, Victoria will:
- implement proportionate liability for purely economic loss (ie excluding death or personal injury);
- clarify the standard of care to be observed by professionals, including medical practitioners;
- implement trials of a system of court- appointed experts;
- press the Commonwealth to amend the TPA so that it does not obviate the effect of changes to State law;
- implement a limitation period of 3 years from date of discoverability, but with this period to be 6 years in the case of minors; reducing to 3 years when they reach 18;
- clarify the interpretation of standard of care, causation and assumption of risk;
- restrict liability for mental harm to recognised psychiatric illness;
- support the development the development of `tariffs' for general damages;
- preclude the awarding of pre-judgement interest on damages for non-economic loss; and
- specify maximum recoverable damages for gratuitous attendant care services.
- In October 2002, Victoria legislated a range of reforms including:
- caps on general damages of $371,000;
- a cap on the loss of earnings of three times average weekly earnings;
- an increase of the discount rate to five per cent;
- the establishment of a special Insurance Commissioner;
- provision of waivers to allow people to accept risk;
- protection of volunteers and `good Samaritans';
- removing the right to claim damages where the injury was suffered through criminal activity or while under the influence of drugs;
- the statute of limitations; and
- ensuring that saying `sorry' does not represent an admission of liability.
- Victoria has acted on a sector by sector basis to assist groups most severely disadvantaged by the lack of availability and increased prices of insurance. Action includes:
- the creation of a group insurance scheme for community organisations;
- providing a grant of $330,000 to the Municipal Association of Victoria (MAV) for the development of risk mitigation activities that are linked to the community group insurance scheme; and
- providing a grant of $100,000 to adventure tourism operators to assist them prepare risk management plans and audits.
- In addition, Victoria has announced it will introduce legislate to contain legal costs associated with small claims. Victoria has also announced it will introduce reforms to legal procedures associated with the settlement of disputed liability claims.
QUEENSLAND
- The Queensland Parliament passed the Civil Liability Bill 2003 on 3 April 2003. The new legislation includes the majority of Justice Ipp's recommendations. A summary of the reforms contained in the Act include:
- a $250,000 cap on general damages;
- proportionate liability for non-personal injuries claims where damages exceed $500,000;
- no liability for failure to warn of obvious risks;
- no liability for injuries arising from obvious risks in the case of recreational activities;
- no liability in cases where the injured person was engaged in criminal activity which contributed to the risk of injury. This will mean that where a court determines, on the balance of probabilities, that a person was engaged in a criminal act, the person will not be entitled to claim damages;
- restricted claims where a person's intoxication contributed to their personal injury. This will involve the mandatory reduction of damages to a claimant who is intoxicated, and removal of any special duty owed to people simply because they are intoxicated; and
- a change in the standard of care for professional groups, including doctors, to protect against liability for acts performed in accordance with a respected body of professional opinion.
- The Civil Liability Bill 2003 complements Queensland's earlier reforms contained in the Personal Injuries Proceedings Act 2002. The Act:
- requires early notification of claims, adequate timeframes for the defendant/insurers to make a determination on liability and mandatory exchange of information;
- restricts legal advertising;
- limits legal costs in small claims;
- excludes juries from hearing personal injury trials;
- excludes exemplary, punitive or aggravated damages; and
- provides for a court to make a consent order for a structured settlement.
- Queensland also has:
- established a group liability insurance scheme for not-for-profit organisations. This scheme commenced operation on 1 September 2002.
- removed stamp duty on public liability insurance premiums for not-for-profit organisations.
- developed an interactive website as a practical guide to assist not-for-profit organisations and small business in applying risk management practices to their own activities.
WESTERN AUSTRALIA
- The Civil Liability Act 2002 was proclaimed on the 1 January 2003 and introduced the following:
- a cap on economic loss to three times the amount of gross average weekly earnings at the date of the damages award;
- structured settlement to allow periodic payments funded by an annuity or other agreed means;
- restrictions on advertising of personal injury legal services and touting;
- a deductible threshold on general damages; and
- threshold and limits on gratuitous attendant care.
- The Volunteers (Protection From Liability) Act 2002 provides volunteers with qualified immunity from civil liability when doing community work for not-for-profit incorporated associations.
- Fire And Emergency Services Legislation Amendment Act 2002 protects volunteer fire units and marine rescue units and their members from civil liability.
- The Insurance Commission Of Western Australia Amendment Act 2002 allows for the establishment of a Community Insurance Fund and for the Commission to provide insurance including Public, Professional and Medical Treatment Liability; Workers' Compensation; Property; Motor Vehicle; and Personal Accident to eligible not-for-profit organisations.
- The Civil Liability Amendment Bill 2003 was introduced into Parliament on 20 March 2003. The Bill's intention is to not only contribute to containing the current insurance crisis, but also help to change social and legal attitudes towards the assumption of and liability for risk. It marks a return of commonsense to the laws of negligence to preserve Western Australian's access to socially important activities and services by encouraging self reliance and responsible behaviour by individuals.
- It addresses the following:
- general principles of liability for negligence ;
- contributory negligence;
- damages for mental harm;
- liability arising from the performance of public functions;
- protection for `good Samaritans';
- the effect of apologies;
- proportionate liability for economic loss; and
- voluntary Assumption of risk.
- The Public Liability Relief package put in place last year also included the introduction of a state-wide risk management campaign that is being coordinated and implemented by the Department of Sport and Recreation, in cooperation with the Insurance Commission of WA.
- The Small Business Development Commission has also undertaken a campaign, targeting businesses around the State with public liability and occupational safety and health workshops.
SOUTH AUSTRALIA
- The Statutes Amendment (Structured Settlements) Act 2002 permits structured settlements.
- The Recreational Services (Limitation of Liability) Act 2002 addresses self-assumption of risk for high-risk activities.
- The Wrongs (Liability and Damages for Personal Injury) Amendment Act 2002 includes:
- the protection of `good Samaritans';
- caps ($241,500) and thresholds (seven days impairment or $2,750 in medical expenses) for general damages, and a regulated scale of damages related to the severity of injury;
- caps on economic loss;
- a ban on interest on damages for non-economic or prospective losses;
- a 5 per cent discount rate for damages for loss of future earning capacity
- exclusion of damages for the cost of investing or managing an award;
- limits on recovery for gratuitous care;
- limits on who can sue for nervous shock;
- no damages for those injured while engaged in a serious criminal activity subject to certain protections;
- intoxication to result in an automatic minimum 25% reduction (or 50% if over 0.05% blood alcohol) when courts are awarding bodily injury damages
- reliance on the care and skill of an intoxicated person to result in an automatic 25% (or 50% if over 0.05% blood alcohol) reduction in damages; and
- protection for expressions of regret
- South Australia has enacted the Volunteers Protection Act 2001 to protect volunteers of government and incorporated bodies from personal liability.
- It currently has pre-litigation procedures that provide opportunities for settlement of claims in an economical way.
- The second stage of South Australia's tort law reforms has recently been introduced to Parliament and addresses the key liability recommendations of the Ipp Report, including:
- providing a defence to a negligence action for doctors and other professionals if they have acted in accordance with a practice widely held by respected practitioners to be a proper practice;
- removing liability for failure to warn of obvious risks, and providing that, for the purpose of a defence of voluntary assumption of risk, plaintiffs are deemed to be aware of obvious risks unless they can prove otherwise;
- in relation to limitation periods making it more difficult to obtain extensions of time beyond the statutory periods and providing for an early notification regime for children's claims;
- codifying and clarifying the common law in relation to the causation, foreseeability and scope of liability principles of negligence; standard of care for professionals, and contributory negligence;
- restoration of the highway immunity for road authorities; and
- capping of economic loss in loss of dependency claims.
- The South Australian Government has expressed support for the adoption of proportionate liability in relation to economic loss and property damage claims.
- South Australia has conducted risk awareness raising and advisory sessions for tourism groups and is considering providing similar services for volunteer and community groups.
TASMANIA
- Tasmania has implemented a range of specific measures, including:
- a discount rate of 7 per cent;
- no provision for pre-judgement interest;
- no damages in respect of gratuitous attendant care;
- a three year statute of limitations for personal injury claims;
- the abolition of stamp duty on public liability insurance policies from 1 July 2002;
- working with Local Government and the Our Community initiative;
- assisting with the development of risk management plans; and
- the establishment of the $1 million Public Liability Insurance Facilitation Scheme to assist not-for-profit and other community organisations to obtain affordable public liability insurance.
- The second phase of reforms is contained in the Civil Liability Act 2002 which:
- restricts the level of damages for those injured where the use of recreational drugs, including alcohol, has contributed to the injury;
- prevents people from being able to claim damages if injured while engaged in serious criminal activities;
- allows the use of structured settlements; and
- ensures that saying `sorry' is not an admission of liability.
- Tasmania is finalising its legislation to implement the nationally agreed Ipp recommendations and to introduce proportionate liability. The draft Civil Liability Amendment Bill 2003 is similar to the New South Wales legislation except that there will be:
- no cap for general damages;
- a cap on earnings of 4.25 times average weekly earnings;
- a threshold for non-economic loss, likely to be a deductable of around $4,000 which tapers out at around $20,000; and
-
no restriction on the recovery of legal costs.
NORTHERN TERRITORY
- The Consumer Affairs and Fair Trading (Amendment) Act 2003 complements the Commonwealth's recent amendments to the Trade Practices Act to remove a statutory impediment to the self-assumption of risk by persons undertaking risky recreational activities.
- The Personal Injuries (Liabilities and Damages) Act 2003 includes:
- a medical impairment model for assessing awards of general damages for non-economic loss, with a 5% threshold and a scaling of awards up to an indexed cap of $350 000.
- a cap on damages for past and future loss of earnings of three times average weekly earnings;
- limits on the circumstances and amount of damages for gratuitous attendant care;
- setting pre-judgment interest on damages awards at the 10 year Commonwealth bond rate;
- setting the discount rate for calculating awards for future losses at 5%;
- prohibiting recovery of damages for those engaged in criminal activity;
- providing that the use of recreational drugs and alcohol be taken into account when assessing contributory negligence;
- prohibiting court awards of aggravated or exemplary damages;
- permitting courts to make orders for structured settlements;
- protecting community organisation volunteers from being sued for acts done in good faith;
- protecting `good Samaritans' who aid a person in need of emergency assistance; and
- ensuring an expression of regret is not construed as an admission of liability.
- The Personal Injuries (Civil Claims) Bill and the Legal Practitioners Amendment (Costs and Advertising) Bill are designed to reduce the cost of legal proceedings and provide for a greater level of certainty by introducing a process with which claimants are required to comply before legal proceedings can be commenced in a court and by placing realistic limits on legal costs and legal advertising.
- A discussion draft bill dealing with remaining Ipp recommendations (those relating to core negligence principles) is expected to be released soon.
AUSTRALIAN CAPITAL TERRITORY
- The ACT has embarked on a three-stage process to take the ACT through the crisis.
- The Civil Law (Wrongs) Act 2002 is the central plank of the first stage. It consolidates and improves existing ACT statutory tort law and introduces the first tranche of ACT tort law reforms. Legislation to give effect to the second stage is presently in preparation. This will integrate longer-term national reviews of insurance related tort matters, in which the ACT has been involved, into the Civil Law (Wrongs) Act. The Third stage will address unevenness in the efficiency with which civil claims are managed by further amendments to the Wrongs Act and related laws dealing with civil procedure.
- Stage one, the Civil Law (Wrongs) Act 2002, contained the following initiatives:
- For those who performed essential functions and were most vulnerable, volunteers and `good Samaritans', legislative relief in relation to negligence claims against those individuals.
- For seriously injured claimants whose damages are significant, as an alternative to lump sum payouts, structured settlements. This will ensure that claiming payments will be properly directed towards care and rehabilitation. It will also prevent `double-dipping' by claimants who fall back on the public health system when lump sum payments are exhausted.
- For those who were better able to assume responsibility for their own high risk activities or those within the 99th income percentile, limitations on recovery are applied in the context that it would be more economically efficient for those groups to carry their own accident insurance.
- On the other hand, for those who choose to act illegally or as a result of self-induced impairment, restrictions on recovery have been imposed.
- In addition, the Government believes that there are further market efficiencies to be gained by sponsoring changes to legal processes, insurers' record keeping and the flow of litigation. The Act covers these areas and it also provides incentives for lawyers to process cases more efficiently.
- Stage two of the ACT Government's tort reform legislative suite contemplates:
- effective management of claims assessment at the early stages of litigation;
- early notification and open disclosure;
- expert witness trial to deal with medical negligence and potentially other classes of negligence;
- changes to the statute of limitations for personal injury actions;
- enactment of provisions complementary to the Commonwealth's amendments to the Trade Practices Act 1974;
- adoption of a system of no-fault apologies in negligence case, excepting third party motor vehicle, sex discrimination and defamation (dealt with in stage 1)
- greater certainty in personal injury outcomes, particularly in the case of medical negligence;
- further measures fostering efficiency in case processing and management;
- use of various forms of alternative dispute resolution, both before and after proceedings are commenced,
- use of pre-trial procedures to assist settlement of cases before they get to court; and
- specific measures dealing with medical negligence, including defences.
- In addition to legislative based reforms, the Government has:
- developed a web-based risk management site in conjunction with leading community organisations;
- introduced a group insurance scheme to the ACT non-profit/volunteer community; and
- conducted a series of widely publicised community risk awareness and management seminars. At least 20 full day seminars are scheduled to for the second quarter of 2003, incorporating Volunteers Management, conducted by Volunteers ACT.