Joint Communique - Tax Reform Highlights

Adelaide

Commonwealth, State and Territory Ministers or their representatives, and the Senior Vice-President of the Australian Local Government Association (the Ministers), met today in Adelaide to discuss ongoing reforms to improve the availability and affordability of liability insurance.

The meeting was the sixth of a series of highly successful meetings held over the course of the last 18 months which has resulted in all jurisdictions implementing a wide-ranging package of reforms. Ministers welcomed the considerable law reform advanced by all jurisdictions and noted that these reforms are already translating into greater availability and price stability in insurance.

Professional Indemnity Insurance

Ministers agreed that reform of professional indemnity insurance requires a package of measures including professional standards legislation, proportionate liability, amendments to the Trade Practices Act 1974 and amendments to section 54 of the Insurance Contracts Act 1984.

Professional Standards Legislation (PSL)

All jurisdictions confirmed their commitment to implementing PSL on a nationally consistent basis.

Ministers heard from professionals and the Professional Standards Council on details of a model for implementing a national system of PSL which would accommodate some flexibility in individual state and territory schemes.

Proportionate Liability

Ministers endorsed a national model for proportionate liability. The model operates so that, in applying proportionate liability to a claim, a court should have regard to the responsibility of any potential defendant who is not a party to the proceedings. Under the model, requiring defendants to notify a plaintiff in writing of the identity and alleged role of any other potential defendants of whom they are aware would provide protection to plaintiffs. Defendants who fail to cooperate would risk being ordered to pay costs.

Queensland indicated that it would continue to contemplate the need to quarantine `consumer' transactions from the application of proportionate liability. Other jurisdictions are of the view that such quarantining is unnecessary given the procedural protection provided by requiring defendants to identify other parties to the action. Insurers indicated quarantining could lead to less favourable insurance cost outcomes.

Insurance Contracts Act

State and Territory Ministers urged the Commonwealth to amend the application of section 54 of the Insurance Contracts Act 1984 as a matter of priority.

Trade Practices Act 1974

The Commonwealth will amend the Trade Practices Act 1974 and other relevant legislation to support PSL consistent with the existing New South Wales and Western Australian legislation.

The Commonwealth has already announced that it will amend the Trade Practices Act and the Corporations Act 2001 so that proportionate liability applies to damages for economic loss under these acts.

State Governments reaffirmed their calls for amendments to the Trade Practices Act to underpin State and Territory personal injury law reform. The Commonwealth considers the amendments will provide, among other things, for constraints on damages and limitation periods broadly consistent with those recommended by the Ipp Review and a possible basis for achieving further harmonisation of tort law reforms over time.

The Commonwealth advised that its second tranche of amendments (the Trade Practices Amendment (Personal Injuries and Death) Bill 2003) is currently under review by a Senate Committee and the third tranche is expected to be introduced into the Parliament in the Spring Parliamentary sittings.

Long-term Care for the Catastrophically Injured

Ministers agreed to proceed to the second stage of analysis of a national scheme for the long-term care of the catastrophically injured. The first stage of the project, on which Ministers heard a report today, involved detailed analysis of data on the number of people that would be covered by such a scheme and the associated costs.

The second stage will involve collecting additional relevant data with a view to assessing options for a long-term care model for consideration by Ministers at their next meeting. Ministers requested that all options be developed on the basis that there would be no net shifting of costs.

Ministers also agreed to consider the possibility of linking risk management for doctors and other health care providers in exchange for possible benefits associated with a national long-term care scheme.

Discussions with Industry

Representatives of the insurance industry assured Ministers that tort law reform is improving insurance conditions in the Australian market and that some capacity and price stability is returning in the areas of public liability and professional indemnity insurance.

Ministers agreed that officials should continue to work closely with the relevant industry bodies to progress the development of professional standards legislation. While Ministers acknowledged the desirability of harmonisation of tort law reforms, there was a recognition that this could take some time to achieve.

The insurance industry representatives agreed to consider arrangements that would help to address problems that some community groups and tourism operators continued to experience in obtaining insurance for certain activities and to submit proposals in this regard to Ministers within one month.

International Marketing of Reforms

Ministers agreed that improving international perceptions of the Australian insurance environment was essential to restoring affordability and availability of liability classes of insurance, given the importance of foreign insurers in this market.

Ministers tasked officials to urgently prepare an official report on tort law reforms to date for distribution in the international insurance centres. Ministers also agreed that opportunities would be taken by select Ministers to promote the report at key international insurance forums.

Emergency Rescue Organisations

Ministers further discussed the position of emergency rescue organisations. Ministers instructed officials to clarify the extent to which current legislative provisions operate to give adequate protection to the organisations responsible for emergency rescues and to report findings at their next meeting.

Next Meeting

Ministers agreed to meet again in February 2004 in Hobart.

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 the first of four reports which monitors costs and premiums in public liability and professional indemnity insurance to assess the extent to which insurance companies are passing on to consumers the benefits of insurance reforms.
The Australian Prudential Regulation Authority (APRA) is conducting work on establishing a national claims data set.

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

The Victorian Government has announced that in the Spring 2003 session of Parliament it will implement most of the remaining Ipp Report recommendations, with some modifications. In particular, Victoria will:
- 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;
- clarify the interpretation of standard of care, causation and assumption of risk;
- restrict liability for mental harm to recognised psychiatric illness; and
- support the development of `tariffs' for general damages.

In May 2003 Victoria legislated further reforms, including:

implement a threshold of greater than 5% whole person impairment for access to general damages;
implement proportionate liability for purely economic loss (ie excluding death or personal injury);
implement a limitation period of 3 years from date of discoverability, but with this period to be 3 years in the case of minors; reducing to 3 years when they reach 18; 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 within the Essential Services Commission;
- 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; 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;
- provide State indemnities, subject to strict risk management conditions, for certain groups and businesses, including heritage rail and
- adventure tourism operators, unable to obtain commercial insurance:
- 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.

QUEENSLAND

The Queensland Parliament passed the Civil Liability Act 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 Act 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 has been operational since 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 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.

Theli Pubc 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.
On the 6 May 2003, the Government approved the introduction of modified Bolam test for medical professionals. However, announced amendments do not include general duty to warn or inform.
The Government also committed on 6 May 2003 to overhauling the limitation periods:

In the case of latent injury, cause of action will accrue when the injury first manifested itself, rather than (as at present) when it first occurred.
Initial limitation period is to be three years - as in every other State.
Courts will be given power to extend time beyond the initial three-year period in various circumstances.
In the case of children, the ordinary limitation provisions will apply where the child is in the custody of a parent or guardian, with various exceptions.
A regime analogous to that applying to children will apply to claims by people with a mental disability.

The Professional Standards Act 1997 came into force in 1998 following a Parliamentary Select Committee Report on Professional and Occupational Liability (final report No 3, January 1994), which recommended legislation modelled on the Professional Standards Act 1994 (NSW). State Cabinet has decided to reinvigorate its professional standards scheme and amend the Act to now make it consistent with New South Wales' Professional Standards Act 1994.
Western Australia has the Offenders (Legal Action) Act 2000, which limits criminals recovering damages for injuries received while committing a crime.
The Government has committed to the re-introduction of the non-feasance rule for road authorities.

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 0.15% 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 0.15% 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 were introduced to Parliament in April but had not been debated when the second session of Parliament ended. The Bill 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.

TASMANIA

Tasmania's Civil Liability Amendment Act 2003, which implements the nationally agreed Ipp recommendations, commenced on 4 July 2003. In relation to the awarding of damages, which it was agreed should be introduced on the state-by-state basis, having regard to the particular circumstances in each jurisdiction, the Act provides:

no cap for general damages;
a cap on earnings of 4.25 times national average weekly earnings;
a threshold for non-economic loss, in the form of a deductible of $4 000 which tapers out at $20 000; and
no restriction on the recovery of legal costs.

The introduction of the nationally agreed reforms to the law of negligence is the third phase of the Tasmanian Government's three phased reform approach to deal with the public liability crisis.
The first phase of reform included the following measures:

assisting with the development of risk management plans for Tasmanian business;
eliminating stamp duty on public liability premiums, representing a $1.7 million saving for consumers;
introducing the $1 million Public Liability Insurance Facilitation Scheme (PLIFS) to assist community and sporting groups to find affordable public liability cover. The PLIFS has, to date, received 151 applications and has provided, or agreed to provide, assistance to 92 organisations in meeting increased public liability premiums, with assistance from the Government of $501 426; and
working with Local Government to help Tasmanian community groups access the Our Community group-buying scheme initiative.

The second phase of reforms is contained in the Civil Liability Act 2002. The Act includes measures to:

ensure that the Courts have the power to order structured settlements, as an alternative to lump sum payouts for future economic loss;
restrict the level of damages that may be awarded in cases where use of recreational drugs (including alcohol) by the injured party has contributed to his or her injury;
prohibit the recovery of damages if the injured person is engaged in serious criminal activity at the time of injury; and
clarify that saying `sorry' is not to be taken as an admission of legal liability.

The above reforms complement measures already in place in Tasmania which had been identified at the 30 May 2002 Ministerial meeting on public liability insurance as being important in addressing public liability and professional indemnity issues.

The discount rate for determining the present value of future costs when calculating damages is set at 7 per cent, above the minimum rate of 3 per cent proposed in the review.
There is no provision for pre-judgement interest to be awarded by the Supreme Court.
Tasmania does not allow damages in respect of gratuitous attendant care.
Tasmania has a three-year statute of limitations for personal injury claims, with judicial discretion for an additional three years.

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 Act commenced on 1 April 2003.
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 prejudgment 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 Act commenced on 1 April 2003.
The Personal Injuries (Civil Claims) Act 2003 and the Legal Practitioners Amendment (Costs and Advertising) Act 2003 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. Both Acts commenced on 1 July 2003.
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 in response to the insurance 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, the Civil Laws (Wrongs) Bill 2003 has been presented to the ACT Legislative Assembly. 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. Stage 2 also addresses aspects of medical indemnity. 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 3 will also pick up national reforms directed at improving access by the profession to professional indemnity insurance.
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 99^th 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.

Stage 3, the Civil Law Wrongs Bill 2004 will, in addition to dealing with reforms to the court system and the claims processing infrastructure, contain the Government's legislative responses to professional indemnity insurance issues.
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 praised 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. 300 people attended the courses. More community risk training is intended. The seminars will be extended to the local small business community in the latter half of 2003.