Boylen, Patrick --- "The effect of CTP changes on injured people: Lessons from South Australia" [2014] PrecedentAULA 60; (2014) 125 Precedent 25

---

THE EFFECT OF CTP CHANGES ON INJURED PEOPLE

LESSONS FROM SOUTH AUSTRALIA

By Patrick Boylen

In July 2013, South Australia (SA) was the first jurisdiction to undergo changes to its compulsory third-party insurance (CTP) scheme under the National Injury Insurance Scheme (NIIS) reform. The changes created a no-fault lifetime care scheme for people catastrophically injured as the result of motor vehicle accidents in SA. However, the changes also effectively erased the rights of many South Australians to sue at-fault drivers for costs of lifetime care caused by their injury, and reduced their entitlements to claim damages for economic loss, non-economic loss and gratuitous care.

With the NIIS reform sweeping across the country, practitioners must take notice of the changes in SA as they signpost what might be in store for people injured on the roads, in workplaces, via medical treatment and in the community nationwide. This article provides a historical overview of the changes, the impacts on injured people’s ability to claim, and practical guidance for practitioners on how to navigate the changes in order to best assist their clients.

HISTORICAL BACKGROUND

On 4 March 2012, the SA government published a Green Paper purporting to examine SA’s CTP insurance scheme. The Green Paper raised three reform options: no-fault cover for catastrophic injuries; a no-fault catastrophic injury scheme combined with a reformed fault-based scheme for non-catastrophic injuries; or a fully no-fault scheme.^[1]

The Green Paper made reference to the Productivity Commission’s 2011 report, Disability Care and Support, which had raised the possibility of a national no-fault scheme to provide long-term care for people who suffer catastrophic injuries as well as a National Disability Insurance Scheme (NDIS).^[2]

On 26 November 2012, a White Paper entitled Reforms to Compulsory Third Party Insurance in South Australia was released against the national background of a strong push for the introduction of the National Disability Insurance Scheme (NDIS) and the NIIS.^[3] However, the White Paper contained no mention of the NDIS or NIIS and focused primarily on the reduction of insurance premiums; providing compensation to people catastrophically injured in accidents regardless of fault; and a negative portrayal of plaintiff lawyers.

Shortly after the release of the White Paper, drafts of the proposed bills and supporting guidelines were released for comment. The proposed three bills were as follows:

• Motor Vehicle Accidents (Lifetime Support Scheme) Bill 2012;

• Civil Liability (Motor Vehicle Accident – Third Party Insurance) Amendment Bill 2012; and

• Motor Vehicles (Third Party Insurance) Amendment Bill 2012.

The Motor Vehicle Accidents (Lifetime Support Scheme) Bill proposed to introduce a no-fault scheme to deliver lifetime care and support to anyone catastrophically injured in a motor vehicle accident. The benefits were to be confined to treatment and care but not income support; only available to the catastrophically injured as determined by the Lifetime Support Scheme (LSS) Guidelines; and provided a structure to deal with disputes and reviews.

The Civil Liability (Motor Vehicle Accident – Third Party Insurance) Amendment Bill was the most controversial. The proposed amendments to the Civil Liability Act would reduce the entitlements of current motor vehicle accident injury claimants.

The proposed amendments to the Civil Liability Act were by far the most detrimental for the victims of motor vehicle accidents:

• All damages, which are awarded for any form of economic loss after applying a discount rate and ‘any other principle arising under the Act or at common law’^[4] are to be discounted by a further 20 per cent.

• Damages for future economic loss are available only if the Injury Scale Value (ISV) exceeds 15 points and non-economic loss is now to be assessed on a 0 to 100 scale (replacing the 0 to 60 scale), and to be based on the ISV.

• No damages are to be awarded for non-economic loss for injuries attracting a scale value of 15 points or less.

• The entry level payment will now be $7,000, increasing on a stepped basis.

• Damages for gratuitous services are payable only where the ISV is greater than 15 points and a requirement for six hours per week for six consecutive months.

• Damages for consortium would be awarded only where the ISV was 16 points or greater.

The Motor Vehicles (Third Party Insurance) Amendment Bill proposed a number of amendments. Under the changes, a notice of claim would be required, along with accompanying documents for all claims. In a benefit for minors, people under the age of 16 injured in a motor vehicle accident would have treatment and care costs paid irrespective of fault or severity of their injury. Lastly, legal costs to be paid by the insurer were to be controlled, as follows:

• No liability for costs in claims not exceeding $30,000;

• Maximum payment of $2,500 for costs in claims between $30,000 and $50,000; and

• Costs in claims between $50,000 and $100,000 to be awarded as per the Magistrates’ Court of South Australia Scale.

It was estimated by the Australian Lawyers Alliance (ALA) that in excess of 80 per cent of current claimants would have their entitlements reduced to a claim for medical expenses only, and to payment for any time off work that is directly related to the injuries (but only after the first week).

The ALA considered that improving the rights of the few catastrophically injured people with no other ability to claim had merit. However, ‘bundling’ these changes with amendments to the Civil Liability Act was unfair and unnecessary. Virtually obliterating the rights to fair compensation for more than 4,500 victims in order to benefit only an estimated 12 victims of car accidents who were not then currently covered was too high a price to pay.

Before the draft legislation was tabled on 6 March, the ALA, in conjunction with the Law Society of SA and the South Australian Bar Association, combined to oppose the changes to the Civil Liability Act. This group raised a substantial fighting fund to establish a protest website, formulated and booked an advertising campaign and engaged professional lobbyists and PR experts. At the same time, intensive discussions and lobbying with the government and other stakeholders took place. As a result of those discussions, the following changes were agreed:

• The threshold for non-economic loss, voluntary services and loss of consortium was reduced from 15 ISV points to 10 ISV points;

• The threshold for claiming loss or impairment of future earning capacity was lowered from 15 ISV points to 7 ISV points; and

• Legal costs would be in accordance with the appropriate court scale for the amount recovered and an agreement to negotiate in good faith with respect to the regulations.

While some of the effects for the majority of road accident victims were ameliorated, the lack of support from the opposition political parties meant that some rights and entitlements had to be reduced in order to preserve and enhance other rights and entitlements.

Meanwhile, on a national scale, proposals regarding a no-fault catastrophic injury scheme had been gaining traction. On 7 December 2012, the Council of Australian Governments (COAG) reaffirmed its ongoing commitment to an NDIS by signing the Intergovernmental Agreement for the NDIS launch. SA, NSW, Victoria, Tasmania and the ACT also signed bilateral agreements with the Commonwealth confirming the operational and funding details for the rollout of the NDIS in each launch site. The Intergovernmental Agreement provided that all jurisdictions would ‘endeavour to agree minimum benchmarks to provide no-fault lifetime care and support for people who are catastrophically injured in motor vehicle accidents prior to the commencement of the NDIS launch’.^[5] The agreement further provided that host jurisdictions would be liable for the cost of NDIS participants who were in the NDIS due to not being covered by an existing injury insurance scheme with the minimum motor vehicle benchmarks.^[6]

In March 2013, the legislative package was passed by the SA Parliament. It consisted of the Motor Vehicle Accidents (Lifetime Support Scheme) Act 2013 (LSS Act); Civil Liability (Motor Vehicle Accidents – Third Party Insurance) Amendment Act (Civil Liability Amendment) and the Motor Vehicles (Third Party Insurance) Amendment Act 2013 (MV Act). The LSS Act established the Lifetime Support Authority (LSA), responsible for the administration of the Lifetime Support Scheme (LSS). The LSS would provide lifetime treatment, care and support for all persons catastrophically injured as the result of a motor vehicle accident after 1 July 2014. The amendments relating to non-catastrophically injured people commenced a year earlier, on 1 July 2013. The Civil Liability Amendment amended the Civil Liability Act to take into account changes to entitlements for people who suffer non-catastrophic injuries as the result of a motor vehicle accident. The MV Act amendments related to the LSS Fund Levy, claims for compensation and other incidental amendments.

Throughout 2013, the ALA, the Law Society of SA and the South Australian Bar Association (generally referred together as the CTP Executive), continued to meet and hold discussions with government representatives in relation to the supporting regulations and also to continue to seek to have the changes abolished or improved.

In 2014, during the lead-up to the South Australian state election (15 March), the CTP Executive determined to mount a further advertising, press and internet campaign, commencing in February 2014. In addition to the Victims Rights Crashed website, the advertising campaign featured large newspaper ads, extensive radio advertising and prominent billboards at major intersections.

At the time, the President of the Law Society of SA, Morry Bailes, stated that:

‘By the state government’s own admission, the expectation is that 70 to 75 per cent of road accident victims won’t have access to compensation for non-economic loss, which means they get nothing for their pain and suffering. The new scheme also creates a threshold below which you cannot be compensated for your income loss, even if you’re unable to work because of your injuries. Even for those who meet the threshold, there’s an automatic 20 per cent reduction on income loss.’^[7]

The opposition Liberal party, in response to the campaign, committed that if elected, it would introduce the 0 to 60 point scale, abolish thresholds, change damages for non-economic loss to a similar basis as in Queensland and remove the discount on economic loss. The Labor state government would not agree to this, but would agree to an earlier review of the scheme. Ultimately, the Liberal opposition was not successful and the state Labor government was returned to power.

In July 2014, SA’s LSS commenced. At the time of writing, seven individuals are currently being supported by the Scheme.^[8]

EFFECTS OF THE CHANGES ON INJURED PEOPLE’S ENTITLEMENTS

As part of the introduction of the LSS, sweeping changes were made to damages entitlements for all people injured in motor vehicle accidents via the legislative package passed (that is, the LSS Act, Civil Liability Amendment and MVA Act) in March 2013.

Changes to economic loss

A threshold was introduced for damages for economic loss or impairment of future earning capacity rated in excess of seven (7) injury scale value (ISV) points. The discretion of a court with respect to the award of damages was further restricted. Under the amendments, a court must not take into account any inference as to a lost opportunity or chance that the court evaluates as having less than a 20 per cent chance of occurring. In short, the amendments significantly restricted the court’s ability to award damages for a loss of a chance.

In addition, an automatic 20 per cent discount applies to any loss or impairment of earning capacity.^[9] This discount applies to all people who satisfy the 7 point ISV threshold, regardless of the severity of their injury, or its longevity. It will particularly adversely affect those who suffer catastrophic injury requiring lifetime care and support.

No attempt has been made to justify this extremely unfair and punitive measure, which will have repercussions for decades to come on the lives and families of injured people.

The combination of the curtailment of the court’s discretion and the automatic 20 per cent discount will result in significant reductions in damages for past and future economic loss for many people. Ultimately, those who have been injured through the fault of another and who suffer economic loss will bear the brunt of these changes. It would appear that these measures have been introduced for the sole purpose of reducing the amount of damages awarded for economic loss.

Changes to non-economic loss

Damages for non-economic loss, or pain and suffering, have also been significantly reduced. The previous 060 scale (s52 of the Civil Liability Act 1936) has now been replaced with a 0100 scale.^[10] Although at the time of writing there have been no determined cases, it can be expected that damages for non-economic loss will be significantly reduced, for two reasons. Firstly, the ISV regulations are harsh in their application and apply an AMA5 approach to the assessment of whole person impairment (WPI).^[11] Consequently, there is no discretion available to the court to question the application of AMA5, and assess the personal impact on the injured person. Secondly, the reduction of damages can be assumed via a simple extrapolation. As we have moved from a 060 scale to a 0100 scale, any entitlement will be reduced in the order of 40 per cent. For example, an assessment of 30 points under the 060 scale, which in 2013 would have attracted a lump sum of $91,830, will now attract an assessment of 18 points resulting in an assessment of $10,000. Further, the caps under the new scale are reduced, from $321,410 to $300,000. Damages for non-economic loss have been reduced for all victims of motor vehicle accidents who have been injured through the fault of another.

Gratuitous care

Following the amendments introduced by the legislative package passed in March 2013, damages in respect of gratuitous care have also been significantly reduced across the spectrum of injury. To qualify for damages in recompense for gratuitous services in respect of non-catastrophic injuries, three criteria must be met: the ISV must exceed 10 points; the services provided or to be provided must be for at least six hours per week, and for a period of at least six consecutive months. These tests apply both to past and future services. This results in injustice to family members who provide services during the recovery period that help a victim to achieve a recovery of less than 11 ISV points. If this is the outcome, the family is subsequently unable to claim for gratuitous care. At the more serious end of the injury spectrum, a person who is catastrophically injured (see ‘Accessing the LSS: Eligibility’ section below) and who is a participant in the LSS, has no entitlement to damages for gratuitous care. The services of a parent, spouse, domestic partner or child in respect of any assessed treatment, care and support needs (as defined or determined by the LSA) will not be remunerated. That is, if family members of the catastrophically injured person provide care and support to the participant, they will not be entitled to any recompense for those services. It is not difficult to imagine that some services might be more efficiently and cheaply delivered by family members than by the LSA.

ACCESSING THE LSS

Eligibility

To be eligible to be a participant in the LSS, the injured person must have sustained bodily injury that meets specific criteria. The injury must have been caused by or arisen out of the use of a motor vehicle, and the accident must have occurred in SA. Injuries covered include serious spinal cord injury, brain injury, certain amputations, certain burns or blindness. These are referred to in Part 2 of the Lifetime Support Authority Scheme Rules (LSS Rules) as ‘eligible injuries’.

A participant in the LSS is entitled to treatment, care and support. A participant is not entitled under the LSS Act to compensation for loss of earnings or non-economic loss. These claims must be brought in the usual way by establishing negligence on the part of another person and an entitlement to damages under the Civil Liability Act 1936 and Motor Vehicles Act 1959. Any treatment, care and support must satisfy the test of being reasonable and necessary in the circumstances and related to the motor vehicle injury.

Making an application to the LSS

An application for entry to the LSS must be made within three years of the date of the accident and can be extended by two years in exceptional circumstances. Only accidents that have occurred after 1 July 2014 are eligible for acceptance.

An application can be made by the injured person, their guardian, insurer or representative, via lodging an application form. If a party other than the injured person has lodged the application, the injured person retains the right to dispute becoming a participant in the LSS.

It is intended that initial applications will be considered as soon as it is apparent on a clinical basis that the person has an eligible injury. This requires either a Functional Independence Measure (FIM) or Wee FIM assessment (the paediatric version of the FIM).

Participants

An applicant can be determined to be an interim participant for no more than two years, unless the LSA is satisfied (based on expert medical evidence) that the injury has not stabilised and may reduce to a level below the relevant eligibility criteria. However, the maximum period for interim participation is three years from the date of acceptance into the LSS. An interim participant may request that the LSA make a determination on whether they are eligible to become a lifetime participant in the LSS. An interim participant can be transitioned to become a lifetime participant if the LSA is satisfied at any time that the person is eligible for lifetime participation. If the interim participant does not request to become a lifetime participant, the LSA must consider the lifetime participation eligibility of the participant, at least 90 days prior to the expiry of the maximum interim participation period of three years.

A person accepted as a lifetime participant in the LSS remains a participant for life: it is irreversible. This also applies to interim participants who become lifetime participants. Interim participants who do not become lifetime participants are entitled to access all of the rights and entitlements under the Civil Liability Act and the Motor Vehicles Act, including access to sue for lifetime care and support. Any period for which a person was an interim participant in the LSS is added to the three-year time limitation pursuant to s36 of the Limitations of Actions Act 1936. In the case of an adult plaintiff, if they were an interim participant for two years, then the time limitation for issuing proceedings will be five years from the date of the accident.

Suspension

Whether interim or lifetime, a participant can be suspended from the LSS if they fail to comply with requirements specified by the LSS Rules regarding assessment of their treatment, care and support needs.^[12] During the period of suspension, the LSA will not pay for their treatment, care or support and when the suspension ceases the participant is not entitled to recover the costs incurred during the suspension. Accordingly, the participant is still a participant but without access to entitlements. The only rationale for this is to ensure compliance with the Rules and plans for treatment, care and support.

Disputes

Disputes with the LSA fall into two broad categories: disputes about eligibility, and disputes about treatment, care and support needs.

Eligibility disputes^[13]

Disputes about eligibility occur when a person disagrees with the decision of the LSA about their eligibility for either interim or lifetime participation. The dispute must be lodged within six months of receiving the letter setting out the LSA’s decision. ‘Non-medical’ matters will be reviewed by a review officer. A dispute based on medical considerations will be referred to an expert review panel. Once the review officer or the expert review panel has made a decision (and there appears to be no time limit on this or mechanism to expedite the review) the decision must be notified to the participant in writing. If the person disagrees with the decision, an appeal to the District Court must be lodged within 28 days of the decision. There is no automatic entitlement to costs: legal costs associated with the review and appeal must be borne by the injured person, unless costs of the appeal are awarded by the court.

Disputes about treatment, care and support needs^[14]

Disputes about the LSA’s assessment of treatment, care and support needs (as set out in what is called the ‘My Plan’) can be dealt with in three ways: discussion with the service planner; a request in writing for re-assessment; or applying for a review by the expert review panel. An LSA assessor who was not involved in the original decision will be appointed to carry out a reassessment, which should be completed within 28 days. An application to the expert review panel must be made within 28 days of receiving the ‘My Plan’. The application can be made at any time during the reassessment process. The decision of the expert review panel is final and the LSA is required to comply with its decisions. There is no appeal available for claimants for disputes about treatment, care and support needs. This stands in stark contrast to the availability of appeal for eligibility disputes.

Criteria for treatment, care and support

Treatment, care and support needs will be provided if they are deemed ‘reasonable and necessary’.^[15] The LSA must consider a number of factors, including benefit to the participant; appropriateness of the service or request; appropriateness of the provider; cost effectiveness considerations; and the relationship of the service or request to the injuries sustained in the accident.

CONCLUSION

Very few people in SA are catastrophically injured in motor vehicle accidents every year. An even smaller number of people are catastrophically injured with no available at-fault party to sue.

The provision of lifetime care and support to catastrophically injured people who were previously unable to claim the cost of their care, is undoubtedly a good thing and is a positive step towards alleviating the burden previously borne by these individuals’ families.

However, many South Australians who are injured on the roads via the fault of another, regardless of the severity of their injuries, have now been denied access to previous rights and entitlements. People who are catastrophically injured have lost both the right to sue for lifetime care and support, and the right to choose and manage their own futures. Instead of being able to manage their own care via a lump sum payment, they will have to live on the drip-feed style of care imposed by the LSA for the rest of their lives. At the other end of the scale, some people who have suffered less severe but still debilitating injuries generating financial and non-financial losses have lost their ability to claim altogether. In some cases, the ability of these motor vehicle accident victims to sue at-fault drivers (no matter how negligent) has been entirely extinguished via the introduction of the new 7 per cent threshold.

The removal of these rights was previously claimed by the SA government to be ‘necessary’^[16] in order to support the very few catastrophically injured people who had no capacity to claim. It has since become evident that the extensive cuts to injured people’s entitlements were not necessary. In the SA state budget in June 2014 it was revealed that changes are expected to net a surplus of $1 billion for the SA government; $500 million of which will be diverted to the SA government’s Highways Fund in 2016-2017.^[17]

And in July 2016, the SA CTP scheme will to be opened up to private insurers. ^[18] While the changes to SA’s CTP scheme were promoted as benefitting injured people, it is possible that the profits are being salted away elsewhere.

The SA government has scheduled a review of the CTP changes for July 2016. It is hoped that the SA government will realise the hardship that these changes have brought to the majority of South Australians injured on the roads, and promptly restore a better balance via reducing thresholds and restoring injured people’s entitlements to include a full assessment of economic loss. As the NIIS progresses, practitioners would do well to take heed of SA’s recent experience, and do all in their power to prevent these changes from advancing further across the country.

Patrick Boylen is a partner at Duncan Basheer Hannon Lawyers in Adelaide and the state president of the ALA SA. PHONE [phone]. EMAIL [e-mail].

---

^[1] Public Discussion Paper South Australia’s Compulsory Third Party Insurance Scheme Green Paper April 2012.

^[2] Productivity Commission, Disability Care and Support, (July 2011). Accessible at http://www.pc.gov.au/projects/inquiry/disability-support/report.

^[3] White Paper, Reforms to Compulsory Third Party Insurance in South Australia, 26 November 2012.

^[4] Civil Liability Act 1936 (SA), s56A(5).

^[5] See Intergovernmental Agreement on the NDIS Launch. Accessible at http://www.ndis.gov.au/sites/default/files/Intergovernmental_Agreement_for_the_National_Disability_Insurance_Scheme_Launch-signed.pdf

^[6] For more information about the Intergovernmental Agreement and the NIIS’s progress, see Emily Mitchell’s article, ‘The National Injury Insurance Scheme: the details revealed’ in this edition.

^[7] See Victims Rights Crashed, www.victimsrightscrashed.com.au.

^[8] LSA, private correspondence, 24 October 2014.

^[9] See note 4 above.

^[10] Civil Liability Act 1936 (SA), 52(3).

^[11] Civil Liability Regulations 2013 (Pt 2 and Schedule 1).

^[12] LSS Rules, Part 1, Rule 7.

^[13] Motor Vehicle Accidents (Lifetime Support Scheme) Act 2013; (MVA (LSS)) Act, (Part 5 Div 2).

^[14] Ibid (Part 5, Div 3).

^[15] LSS Rules, Part 4, Rule 3.

^[16] White Paper, see note 3 above.

^[17] See www.statebudget.sa.gov.au/papers; and Victims Rights Crashed, ‘Worry over use of CTP funds,’ 24 June 2014.http://www.victimsrightscrashed.com.au/announcements/insurance-worries.

^[18] See www.statebudget.sa.gov.au/papers; and Victims Rights Crashed, ‘Worry over use of CTP funds,’ 24 June 2014.http://www.victimsrightscrashed.com.au/announcements/insurance-worries.