Commonwealth, State and Territory Ministers and the Senior Vice President of the Australian Local Government Association (the Ministers) met today to continue to address a range of issues surrounding the availability and affordability of public liability and related insurances. This meeting has followed three highly successful meetings on this issue held in March, May and October this year.
Given the caretaker status of the Victorian Government, Minister Lenders was not present at the meeting.
The national package
Ministers agreed on a package of reforms implementing key recommendations of the Ipp Report. They agreed that the key Ipp recommendations that go to establishing liability should be implemented on a nationally consistent basis and each jurisdiction agreed to introduce the necessary legislation as a matter of priority.
The Commonwealth confirmed that it would amend the Trade Practices Act to support reforms that are nationally consistent and it agreed in principle to amend in areas of inconsistency.
Ministers agreed that this national package should have a significant impact on the public liability crisis and reaffirmed the importance of insurers quickly and fully passing on the benefits of reform to consumers.
Ministers noted the progress made by NSW and that its Civil Liability Amendment (Personal Responsibility) Bill 2002 implements most of the recommendations from the Ipp Report.
All other States and Territories noted that the Bill provides a model to develop nationally consistent reform.
Ministers noted an actuarial assessment on the Ipp Report recommendations provided by PricewaterhouseCoopers. The assessment showed that the implementation of elements of the Ipp Report could be expected to deliver an initial reduction in public liability premiums in the order of 13.5 per cent, where it can be quantified, and an 80 per cent reduction in the number of small claims. Further, the behavioural effects of adopting the suite of Ipp recommendations on the definition of negligence, duty of care, and other recommendations on liability reform should result in significantly larger savings over time. Significant reductions in medical indemnity insurance premiums of between 15 per cent and 18 per cent were also estimated for most jurisdictions.
Ministers noted the positive response of insurers to the Ipp recommendations. Industry representatives present at the meeting assured Ministers that adoption of the Ipp recommendations will increase the availability of public liability insurance cover, particularly in the community sector, and will bring certainty and stability to pricing. Industry agreed with the findings of the PricewaterhouseCoopers report on the likely 14.7 per cent reduction in public liability claims' cost, which will flow through to premiums to the extent of an estimated 13.5 per cent, following the adoption of those recommendations expected to have an easily quantifiable financial effect. Further, the behavioural effects of adopting the suite of Ipp recommendations on the definition of negligence, duty of care, and other recommendations on liability reform should result in larger savings.
Damages, caps and thresholds
To ensure these reductions, Ministers agreed that a system of thresholds and/or scales for general damages coupled with restrictions on legal costs is an imperative and noted that most States are moving in this direction.
A range of professionals are currently exposed to joint and several liability for professional default. Professionals have traditionally dealt with their liability exposure for professional default through professional indemnity insurance. The operation of insurance and the law of joint and several liability has given rise to professionals often being singled out as the sole target for legal action in proceedings for property damage and purely financial loss even when the professional is only one of the parties involved and may have only contributed in a minor way to the loss. These factors have led to an exponential increase in professional indemnity premiums which are not sustainable.
Ministers noted that proportionate liability and professional standards legislation are not mutually exclusive. There was strong agreement on proportionate liability for economic loss, with some jurisdictions committed to implementing legislation and others close to finalising their position. Ministers agreed to consider in detail the merits of professional standards legislation.
In relation to medical indemnity, Ministers noted the Commonwealth's package of measures to address rising medical indemnity insurance premiums and ensure a viable and ongoing medical indemnity insurance market. The Prime Minister in his press release of 23 October 2002 called on State and Territory governments to continue tort and legal system reforms, and to maintain indemnities for doctors working in public hospitals and existing support measures for doctors in rural areas. The Ministers noted the steps taken to date by jurisdictions to increase certainty for medical indemnity insurers.
Ministers were updated on some details of the Commonwealth proposal for a scheme to provide reinsurance cover for terrorism risk on commercial property and infrastructure facilities, including local government owned assets, and the possibility of State and Territory participation in this scheme to protect risks associated with their statutory schemes, worker's compensation and comprehensive third party insurance.
Forward work program
Ministers noted the work already achieved in the reform of public liability insurance as set out in the attachment. They agreed that much progress has been made. All Ministers noted their ongoing commitment to further reform.
Ministers agreed that they should report these achievements to COAG as well as mapping out a forward work plan.
Ministers agreed that the Heads of Treasuries Insurance Issues Working Group should be tasked with the following:
- Urgently prepare a draft report for COAG that can be finalised by Ministers by the end of November.
- Examine options for amending the Trade Practices Act to ensure State and Territory reforms will not be compromised where national consistency cannot be achieved.
- Consider the economic impacts of proportionate liability and also capping of professionals' liability through the national adoption of professional standards legislation on the professional indemnity insurance market and to contribute to the SCAG/MINCO deliberations.
- In relation to the issue of long-term care costs, the IIWG will undertake a comprehensive review of current arrangements and possible alternatives, commencing with an expeditious collection of relevant data and analysis of the nature of the problem for discussion at the next ministerial meeting.
Ministers agreed it was necessary to keep up the momentum of the reform processes and agreed to meet in Perth in early April to continue to drive the reforms.
STATE AND TERRITORY REFORMS COMPARED WITH AGREEMENTS REACHED AT PREVIOUS MEETINGS
At the First Ministerial Meeting on Public Liability Insurance on 27 March, Ministers agreed to:
- the use of structured settlements;
- the implementation of waivers and self assumption of risk;
- encourage group buying;
- better data collection by industry and the Australian Prudential Regulation Authority (APRA); and
- improve risk management.
At the Second Ministerial Meeting on Public Liability Insurance on 30 May, Ministers agreed to:
- price monitoring by the Australian Competition and Consumer Commission (ACCC);
- the protection of volunteers and not-for-profit organisations;
- broad based tort law reform, including:
- establishing a Review of the Law of Negligence; and
- aligning common law damages more closely with statutory schemes;
- legal system reforms; and
- a benchmarking study of claims processing.
- The Commonwealth introduced into Parliament on 6 June 2002 the Taxation Laws Amendment (Structured Settlements) Bill 2002 to remove tax barriers to structured settlements.
- The Trade Practices Amendment (Liability for Recreational Services) Bill 2002 was introduced into Parliament on 27 June 2002. This Bill seeks to amend the Trade Practices Act 1974 (TPA) to allow people to sign waivers and assume the risk of participating in inherently risky recreational activities.
- The Commonwealth Volunteer Protection Bill 2002 was introduced into the Parliament on 23 October 2002. This Bill exempts Commonwealth volunteers from liability.
- 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 preliminary work on establishing a national claims data set.
- The Productivity Commission is conducting a benchmarking study into Australian insurers claims management practices against world standards.
- The Attorney-General, through the Standing Committee of Attorneys-General (SCAG), is pursuing legal system reforms.
New South Wales
- New South Wales has announced a reduction in stamp duty on public liability insurance premiums.
- 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) Bill 2002, which
was introduced into the Parliament on 23 October 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 also halved the stamp duty on insurance to five per cent 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 has acted on a sector by sector basis to assist groups most severely
disadvantaged by the lack of availability and increased prices of insurance.
- 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.
- Victoria legislated a range of reforms including:
- caps on general damages of $360,000;
- 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.
- In addition, Victoria has introduced legislation to contain legal costs associated with small claims. It has also introduced reforms to legal procedures associated with the settlement of disputed liability claims.
- Queensland will introduce a second tranche of tort reform in early December
which will include the majority of Justice Ipp's recommendations and in addition:
- prohibiting the recovery of damages where the injured person was engaged in criminal activity at the time of injury (with appropriate boundaries);
- taking into account the use of recreational drugs (including alcohol);
- dispensing with the concept of joint and several liability on economic loss claims.
- The Queensland Personal Injuries Proceedings Act 2002 has a number
of reforms to reduce the costs of legal proceedings and to reduce frivolous
claims for minor injuries. The Act:
- requires early notification of claims, adequate timeframes for the defendant/insurers to make a determination on liability and mandatory exchange of information;
- introduces restrictions on legal advertising;
- introduces limits on legal costs in small claims;
- allows expressions of regret by defendants;
- limits economic loss to three times average weekly earnings;
- excludes juries from hearing personal injury trials;
- exclusion of exemplary, punitive or aggravated damages;
- provisions for a court to make a consent order for a structured settlement; and
- introduces a level of protection for volunteers.
- Other measures Queensland will consider as part of the second tranche of
- a scale on general damages;
- changes to the statute of limitations while maintaining protection for minors; and
- the protection of volunteers from being sued except for gross negligence.
- Queensland has established a group insurance scheme for not-for-profit organisations. The group insurance scheme commenced operation on 1 September 2002.
- Queensland has announced a reduction in stamp duty on public liability insurance premiums for not-for-profit organisations.
- Western Australia's Civil Liability Bill 2002 was passed by Western Australia's
upper house on 13 November 2002. The Bill is the first stage of the Government's
commitment to tort law reform, including:
- a deductible of $12,000, indexed to a statutory formula, to apply for general damages;
- damages for economic loss to be capped at three times gross average weekly earnings;
- restricting advertising of personal injury legal services to limited factual matters, and touting for the services;
- enabling courts to make an order approving a structured settlement; and
- restrictions on limits on recovery for gratuitous attendant care.
- The Insurance Commission of WA Amendment Bill 2002 was passed by Western Australia's upper house on 13 November 2002. This bill enables the Government's insurance arm to provide insurance cover to eligible not-for-profit and community organisations who are unable to find relevant, affordable or any cover at all.
- The Volunteer (Protection from Liability) Bill 2002, providing individual volunteers with qualified immunity from civil liability when doing community work for not for profit incorporated associations, was passed by the Western Australian Parliament on 8 November 2002.
- Pre-judgement interest on non-economic loss is already precluded.
- A second stage of tort law reform (including waivers for risky activities)
will be introduced as a priority. This will include addressing;
- key recommendations of the Ipp report;
- protection from civil liability for recreational service providers where risk warnings and waivers are used;
- ensuring that contributory negligence is not applicable for those injured while committing an indictable offence or taking drugs;
- allowing for apologies to be made without this being an admission of liability; and
- protecting good samaritans when helping a person in an emergency.
- The Statutes Amendment (Liability for Personal Injury) Act 2002 permits structured settlements.
- The Recreational Services (Limitation of Liability) Bill 2002 addresses self-assumption of risk for high-risk activities.
- The Wrongs (Damages for Personal Injury) Amendment Bill includes:
- the protection of `good samaritans';
- caps ($241,000) 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;
- limits on recovery for gratuitous care;
- no damages for those injured while engaged in a criminal activity or while under the influence of drugs (including alcohol); and
- protection for expressions of regret
- South Australia has enacted the Volunteer Protection Act 2001 to protect volunteers of government and incorporated bodies from liability for claims. It currently has pre-litigation procedures that provide opportunities for settlement of claims in an economical way.
- South Australia is conducting risk awareness raising and advisory sessions for tourism groups and will soon provide similar services for volunteer and community groups.
- 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; and
- assisting with the development of risk management plans.
- The establishment of the $1 millions Public Liability Insurance Facilitation Scheme to assist Not for Profits access cover.
- The second phase of reforms announced on 11 September 2002 includes:
- restricting the level of damages for those injured where the use of recreational drugs, including alcohol, has contributed to the injury;
- restricting people from being able to claim damages if injured while engaging in criminal activities;
- the use of structured settlements; and
- ensuring that saying `sorry' is not an admission of liability.
- The third phase of reforms will be consistent with nationally agreed principles of the Ipp Report and the Ministerial Meeting.
- Legislation has been introduced to complement the Commonwealth's Trade Practices (Liability for Recreational Services) Bill.
- The Personal Injuries (Liabilities and Damages) Bill was introduced into
Parliament on 17 October and includes:
- an indexed cap of $250,000 for general damages;
- a cap on damages for past and future loss of earnings of three times average weekly earnings;
- a threshold for non-economic loss of $15,000;
- 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;
- exempting volunteers from being sued when undertaking work for their volunteer organisation;
- protection for 'good Samaritans';
- setting standard, commercially realistic interest rates for past damages and discount rates for future damages;
- tightening the provisions where compensation is payable for voluntary or family carers;
- allowing courts to make orders for structured settlements; and
- a provision allowing people to say `sorry' without this being an admission of liability.
- Discussion drafts of a third and fourth Bill have been released. The third Bill, the Personal Injuries (Civil Claims) Bill, reforms court processes and limits legal costs for personal injury matters. The fourth Bill, the Legal Practitioners Amendment (Costs and Advertising) Bill amends the Legal Practitioners Act to deal with "no win, no fee" cases and legal advertising.
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:
1. For those who performed essential functions and were most vulnerable, volunteers and good Samaritans, legislative relief in relation to negligence claims against those individuals.
2. 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.
3. 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.
4. 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.
5. 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:
1. Greater certainty in personal injury outcomes, particularly in the case of medical negligence;
2. Further measures fostering efficiency in case processing and management;
3. use of various forms of alternative dispute resolution, both before and after proceedings are commenced,
4. use of pre-trial procedures to assist settlement of cases before they get to court; and
5. Specific measures dealing with medical negligence, including defences.
- addition to legislative based reforms, the Government has:
- Developed a web-based risk management site in conjunction with leading community organisations;
- Provided re-insurance above $5m for qualifying non-government service providers; and
- Secured an arrangement in principle with NRMA to provide a group insurance scheme for community organisations.