The nuts and bolts of the new NSW CTP scheme
Published on June 21, 2017 by Tim Concannon
As first published in the Law Society Journal – June 2017
The Motor Accident Injuries Bill 2017 (NSW) was passed by New South Wales Parliament on 30 March 2017 and was assented to on 4 April 2017. The Bill introduces a new NSW Compulsory-Third Party (‘CTP’) Accidents Scheme which replaces the scheme under the Motor Accidents Compensation Act 1999 (NSW). It is anticipated that the Motor Accident Injuries Act 2017 (NSW) (‘the Act’) will commence on or about 1 December 2017. It will only apply to motor accidents occurring after its commencement.
The Act is the cornerstone of what is to be a new CTP scheme for all those injured or who die as a result of a motor accident in New South Wales. It represents a substantial shift away from what was fundamentally a fault-based scheme to a genuine hybrid model which combines access to statutory, no-fault benefits with limited access to common law damages. It also includes a number of new provisions designed to deter false or misleading claims and to reduce the opportunity for insurers to generate so-called ‘super profits’.
Central to the functioning of both the statutory and common law branches of the new CTP scheme is the definition of what is a ‘minor injury’.
Definition of ‘minor injury’
Generally speaking, those with a ‘minor injury’ will only be able to access statutory benefits (medical treatment, weekly benefits and commercial care) for a period of no more than six months. Those with a ‘minor injury’ will be unable to pursue a common law damages claim.
Pursuant to s 1.6(1) of the Act, a ‘minor injury’ is defined as being one or more of a soft tissue injury or a minor psychological or psychiatric injury.
A soft tissue injury is defined as ‘an injury to tissue that connects, supports or surrounds other structures or organs of the body (such as muscles, tendons, ligaments, menisci, cartilage, fascia, fibrous tissues, fat, blood vessels and synovial membranes) but not an injury to nerves or a complete or partial rupture of tendons, ligaments, menisci or cartilage’ (s 1.6(2)).
A minor psychological injury is defined as a psychological or psychiatric injury ‘that is not a recognised psychiatric illness’ (s 1.6(3)).
The regulations may exclude a specified injury from being a soft tissue injury or from being a minor psychological injury, or may include a specified injury as a soft tissue injury or as a minor psychological injury (s 1.6(4)).
Statutory Benefits Scheme
The statutory benefits scheme covers weekly benefits and medical treatment expenses (including commercial care). Gratuitous care is no longer covered either under the statutory benefits scheme or under the common law damages scheme.
A claim form now has to be served within three months of the accident rather than the current position which is six months. If the claim form is not served within 28 days, then the injured person is not entitled to weekly benefits for any period prior to service of the claim form (s 6.13).
A liability for statutory benefits of any type cannot be redeemed or settled by payment to the Claimant of a lump sum (s 3.42).
No statutory benefits are payable if compensation under the Workers Compensation Act 1987 is payable to the injured person in respect of the injury concerned after the worker has made a successful claim for workers compensation. A claim is considered to have been successful ‘if liability for any workers compensation has been accepted by the insurer for the claim’ (s 3.35(3)).
All injured persons under the statutory benefits scheme are entitled to have access to weekly benefits and medical treatment expenses (including commercial care) for 26 weeks after the accident, regardless of fault, but excluding those who are charged with or convicted of a ‘serious driving offence’ (s 3.37) and excluding at-fault drivers or owners whose vehicle was uninsured (s 3.36).
Weekly benefits after six months
Statutory benefits stop after six months for those mostly at-fault (responsible for contributory negligence of more than 61 per cent) and for those with a minor injury. The rate of payment will depend on the entitlement period and what, if any, is the extent of the loss of earning capacity.
For the first two entitlement periods (up to week 78) an earner is entitled to weekly benefits based upon a proportion of the difference between the person’s pre-accident weekly earnings (as defined) and the person’s post-accident earning capacity. For this first 78 weeks, post-accident earning capacity is only measured by reference to the employment in which the person was engaged immediately before the motor accident (cl 8(1)(a) of sch 1). The injured person is only entitled to a proportion of the mathematical difference between his or her pre-accident weekly earnings and post-accident earning capacity and the weekly benefit is capped at a maximum figure of $3,853 (to be indexed). In the case of the first entitlement period (the first 13 weeks) this proportion is 95 per cent and in the case of the second entitlement period the proportion is 80 per cent for those suffering a total loss of earning capacity and 85 per cent for those with a partial loss of earning capacity (ss 3.6 and 3.7).
After week 78, weekly benefits are determined based on a proportion (either 80-85 per cent) of the mathematical difference between the person’s pre-accident earning capacity and the person’s post-accident earning capacity (s 3.8). During this entitlement period, the assessment of the injured person’s post-accident earning capacity is based on the open labour market reasonably available to the person (clause 8(1)(b) of sch1).
Unless the injured person has a pending claim for damages, all weekly benefits cease after two years (s 3.12(2)). If the person’s injury is the subject of a pending claim for damages and the degree of permanent impairment is not greater than 10 per cent, then weekly benefits will stop after three years. If the person’s injury is the subject of a pending claim for damages and the injury is assessed at greater than 10 per cent whole person impairment, then the person is entitled to weekly benefits for up to five years.
Section 3.16 of the Act provides that an insurer can make a decision about the Claimant’s pre-accident earning capacity or post-accident earning capacity at any time during the course of the statutory claim. However, there are certain mandated periods of notice that are required before benefits are terminated. This period of notice is two weeks in respect of the first entitlement period, four weeks in the case of the second entitlement period, and eight weeks in the case of any period after the second entitlement period.
Section 3.38 of the Act provides that, for any period after 26 weeks, weekly statutory benefits are to be reduced in accordance with any contributory negligence of the Claimant and regulations are likely to be promulgated (s 3.38(4)) specifying fixed percentages for contributory negligence deductions.
Medical treatment expenses
Under the statutory scheme, the vast majority of injured persons are entitled to reasonable and necessary medical treatment payments (including commercial care) for life provided these relate to the injury resulting from the motor accident concerned. The main exception to this medical treatment coverage is in respect of those mostly at-fault or in the case of minor injuries (s 3.11). There is some provision for medical treatment and care for those with minor injuries beyond six months but only where there is evidence treatment is likely to improve recovery/rehabilitation or the insurer delayed approval or in some other appropriate circumstance (s 3.28(3)). After five years, liability for medical treatment expenses is to be transferred from the CTP insurer to the Lifetime Care and Support Authority.
The dispute resolution system for statutory benefits
The dispute resolution mechanism for the proposed statutory benefit scheme is the new Dispute Resolution Service which is to form part of the State Insurance Regulatory Authority (‘SIRA’). Every dispute must first be the subject of an internal review be- fore it can be referred to the Dispute Resolution Service (s 7.11). Depending on the nature of the dispute, it can then be referred ei- ther to a Merit Reviewer or a Medical Assessor or a Claims Asses- sor. The relevant jurisdiction of each of these branches of the new Dispute Resolution Service is detailed at Schedule 2.
There is a right of appeal from the Merit Reviewer to a Review Panel consisting of two Merit Reviewers if the Proper Officer is satisfied there is reasonable cause to suspect that the original decision was incorrect in a material respect (s 7.16).
Common law access
Under the Act, a common law damages claim will now only be available for specified categories of economic and non-economic losses and only for those sustaining something other than a ‘minor injury’. The definition of economic loss at s 4.5 clearly excludes medical treatment and care expenses. This means that such expenses can no longer form part of a damages claim. As under the current system, non-economic loss is only available if the Claimant is assessed above 10 per cent whole person impairment.
A claim for damages is now to be made separately from a claim for statutory benefits. Unless the claim is in respect of an injury which has resulted in a degree of permanent impairment of greater than 10 per cent, claims for damages cannot be made before the expiration of 20 months after the motor accident (s 6.14). Unless the degree of permanent impairment as a result of the injury has been assessed at greater than 10 per cent, a claim for damages cannot be settled within two years of the motor accident (s 6.23). Accidents which were previously referred to as blameless motor accidents are now referred to as ‘no-fault motor accidents’ (s 5.1).
Non-economic loss damages are, as is currently the case, capped at $521,000. Past and future loss of earnings/earning capacity is capped at 2.5 x average weekly earnings which is currently $3,853 net per week.
There will now be a three year time limit which applies to lodging a Claims Assessment and Resolution Service (‘CARS’) application (s 7.34) but a CARS Assessor can grant leave for a claim to be referred for assessment outside of this period if a full and satisfactory explanation for the delay has been provided.
The primary forum for resolution of common law motor accident claims is still a claims assessor who now forms part of the Dispute Resolution Service.
The new Act still provides that some matters will be exempted from assessment by the Dispute Resolution Service and will be permitted to proceed straight to Court as is presently the case.
Section 7.48 of the Act provides that SIRA will establish an advisory service ‘to assist Claimants in connection with their claim for statutory benefits and claims for damages and with the dispute resolution procedures’. Section 8.10 says that a Claimant for statutory benefits is only entitled to recover from the insurer reasonable and necessary legal costs if these are permitted by the regulations or the Dispute Resolution Service determines the costs to be payable. The Dispute Resolution Service is only permitted to allow payment of legal costs in a statutory benefits dispute if the Claimant is under a legal disability or exceptional circumstances exist (s 8.10(4)).
The position with regard to legal costs in common law claims is unclear at this stage and it is anticipated that this will be the subject of consultation with the profession over the coming months. Practitioners are reminded that there is already a prohibition on contracting out of party/party legal costs where the claim is resolved for not more than $50,000 by reason of the Motor Accidents Compensation Amendment (Claims) Regulation 2016 which applies to claims made on or after 1 November 2016.