I. INTRODUCTION

This Report describes existing compensation schemes for accident victims, including the common law negligence action, workers’ compensation and the social security system (Chapter 2). A critique of the common law negligence action is made (Chapter 3) and proposals for reform of accident compensation arrangements in Australia and elsewhere are examined (Chapter 4). The Report considers the basic objectives which should be sought by a Transport Accidents Scheme and the general principles which the Scheme should implement (Chapter 5). Chapter 6 compares the comprehensive no-fault scheme for transport accident victims proposed in the Report with the “dual” scheme (whereby a limited no-fault scheme and the common law co-exist) proposed by some critics of the Commission’s Working Paper Accidents Scheme. The Report then provides a detailed exposition of the proposed Transport Scheme.

The full text of the recommendations appears at the end of the Report (page 556). This Summary provides an outline of the Scheme, with appropriate references to the detailed recommendations and Chapters in the Report. The language of the summary often differs from that of the recommendations. Where this occurs, the Summary must yield to the Report and the detailed recommendations. The Summary is written in the present tense, but introduction of the Scheme in New South Wales will require legislative action.

II. THE TRANSPORT ACCIDENTS SCHEME

A. General

1. Transport Accidents

The Scheme covers death or bodily injury caused by or arising out of the use of

• motor vehicles; and
• forms of public transport, including
• trains, taxis, buses and ferries,

but could be extended to other kinds of accidents. Bodily injury includes nervous shock.

2. Replacement of the Common Law

The Scheme creates a statutory entitlement to compensation for people injured or the families of people killed in transport accidents, regardless of whether they can or cannot prove that another person was at fault for the accident. This right applies in substitution for any action which the injured person or his or her family may have had under the common law negligence action for damages for personal injury or loss of support.

3. Administration

The Scheme is administered by an independent statutory authority called the Accident Compensation Corporation.

4. Benefits

The benefits under the Scheme include:

• periodic compensation for loss of earning capacity;
• a right to medical, vocational and social rehabilitation;
• support services such as replacement household services and attendant care;
• assistance with accommodation for disabled people such as house modifications;
• assistance with mobility through mobility allowances and vehicle modifications;
• compensation for permanent disability by a lump sum payment additional to other benefits;
• lump sum and periodic compensation to the family of a deceased person; and
• a right to medical, hospital and related services, provided where possible through the general health care system.

5. Indexation

Monetary compensation under the Scheme is indexed to movements in Average Weekly Earnings (AWE), with adjustments made twice each year.

B. Compensation for Loss of Earning Capacity

1. Earners and Non-Earners

Generally speaking, the principles governing compensation for loss of earning capacity are similar for earners and non-earners, but there are some differences. An “earner” includes not only those employed or self-employed at the date of the accident but also those who, while not working when the accident occurred:

• had worked for a significant period in the two years before the accident;
• had firm arrangements to enter or re-enter the workforce during the two years following the accident; or
• would have commenced work in the two years following the accident and have been incapacitated for at least six months.

The definition excludes those who had permanently left the workforce at the date of the accident. A “non-earner” is a person who does not come within the definition of earner.

2. General Principles Governing Compensation

Right to Compensation

People incapacitated in transport accidents are entitled to compensation for loss of earning capacity. However, a non-earner is entitled to such compensation only if suffering long-term incapacity- that is incapacity for more than 104 weeks. Compensation is paid on a periodic basis in much the same way as earnings would have been received by the accident victim had the accident not occurred.

Loss of Earning Capacity

Loss of earning capacity is generally measured by deducting from the victims pre-accident earning capacity his or her post-accident earning capacity. Pre-accident earning capacity is measured in a number or different ways, depending on whether the person is employed, self-employed or a non-earner and depending on whether the incapacity is short or long term.

Post-Accident Earning Capacity

Post-accident earning capacity is usually measured by what the accident victim is actually earning after the accident. However this standard does not apply where the person:

• is capable of undertaking work which is reasonably available, given his or her disability and other personal characteristics such as age, education place of residence and work experience; and
• is capable of competing in the labour market for this kind of work at no significant disadvantage by reason of the disability, when compared to non-disabled applicants.

Proportion of Loss Compensated

Compensation for loss of earning capacity is paid at the rate of 80 per cent of the loss. As an incentive to rehabilitation this percentage may be increased if the accident victim undertakes part-time employment.

Limit on Compensation

The maximum earning capacity for which compensation can be paid is 150 per cent of AWE ($630 at June 1984). Thus, the maximum weekly compensation for loss of earning capacity is $504 (80 per cent of $630).

Notional Earning Capacity

An incapacitated person aged 21 or over, suffering long-term incapacity, is deemed to have a minimum (notional) earning capacity of 50 per cent of AWE ($210 at June 1984). Such a person, if totally incapacitated, would receive minimum weekly compensation of $168 (80 per cent of $210). Notional earning capacity is

• 40 per cent of AWE ($168 at June 1984) at age 18-20, and
• 30 per cent of AWE ($126 at June 1984) at age 16-17.

Age Limits

In general, compensation for loss of earning capacity is payable, during the period of incapacity, to a person who has reached the age of 16 and is not over 65. However, compensation may be paid to a person under 16 or over 65 in certain circumstances.

Redemptions

There can be no redemption of entitlement to compensation for loss of earning capacity by payment of a once-and-for-all lump sum, unless the periodic amount is so small that the cost of paying the sum unnecessarily burdens the administration of the Scheme. Where such a redemption occurs and the person’s capacity for work is subsequently reduced, for example because his or condition worsens, periodic payments are resumed.

Assessment of Permanent Incapacity

Where a transport accident victim has:

• sustained a permanent disability;
• suffered a loss of earning capacity which is likely to continue indefinitely; and
• taken advantage of rehabilitation opportunities,

the Corporation can make an assessment of permanent incapacity. Compensation is thereafter paid in accordance with the assessment and cannot be decreased even if the person s capacity for work subsequently increases. However, the assessment can be reopened if the person’s condition deteriorates or his or her employment status changes.

3. Compensation for Earners

Employees

The pre-accident earning capacity of an employee is usually measured by his or her normal weekly earnings at the date of the accident. “Earnings” includes income from personal exertion and covers the value of board and lodging and some other benefits in kind. In determining the level of normal weekly earnings account can be taken of earnings over a period of up to two years. Adjustments can be made for periods of abnormal income and for variations in earnings from seasonal employment or changes (actual or proposed) in employment or working hours.

Self-Employed

It is not always possible to adopt the same method of assessing loss of earning capacity for a self-employed person as is applied to an employed person. Depending on the circumstances loss can be assessed by reference to:

• the difference between pre- and post-accident earnings;
• the cost of providing a replacement worker; or
• the wage or salary the self-employed person could have earned in employment.

Waiting Periods

Where an earner was working at the date of the accident, compensation for loss of earning capacity generally commences after five working days of incapacity. Different provisions apply where the person is not working at that date.

Age Limits

Full-time earners under the age of 16 can receive compensation for loss of earning capacity. Earners who are incapacitated between the ages of 61 and 70 can be paid compensation beyond the age of 65 in certain circumstances. Earners aged 70 or over may be entitled to up to two years’ compensation for loss of earning capacity.

Potential for Advancement

The Scheme provides compensation for loss of potential for advancement where an earner has sustained long-term incapacity (104 weeks or longer). “Potential for advancement” refers to the earnings the person could have been expected to earn over the likely period of incapacity had the accident not occurred. It takes account of factors, such as opportunities for promotion or professional advancement or increases in earnings resulting from further education or training, which might otherwise not be considered. Only those events likely to occur within 10 years of the accident are taken into account in considering potential for advancement.

4. Compensation for Non- Earners

A non-earner incapacitated for 104 weeks or more is entitled to compensation for loss of earning capacity, regardless of whether he or she would have entered or returned to the workforce. Ordinarily compensation is assessed by reference to the non-earner’s “notional earning capacity”, a totally incapacitated non-earner receiving 80 per cent of that notional figure. However, a non-earner may apply for compensation on the basis of “potential for advancement”, which is assessed on the same principles as those applying to an earner. A non-earner can also apply for assessment of permanent incapacity.

C. Rehabilitation

1. The Right to Rehabilitation

Transport accident victims have a right to prompt and effective rehabilitation. Where practicable, services are provided through existing hospitals and agencies, with the Corporation providing appropriate financial Support However, the Corporation may engage its own personnel to ensure that services are accessible on a decentralised basis.

To encourage prompt intervention and the coordination of services, the Corporation has a Rehabilitation Section, which is under a duty to seek Out accident victims requiring rehabilitation as soon as possible after the accident. The Scheme meets the costs of rehabilitation services required by transport accident victims, including necessary travel and accommodation expenses.

2. Aids, Pharmaceutical Supplies and Medical Equipment

The Scheme provides aids and appliances (such as artificial limbs and organs and wheelchairs), pharmaceutical supplies and medical equipment required by transport accident victims. Aids and equipment are replaced as often as is necessary.

3. Workforce Rehabilitation

Vocational rehabilitation is available not only to disabled transport accident victims, but also to the dependent spouses of people killed in transport accidents. The Scheme encourages return to the workforce by empowering the Corporation to:

• finance necessary workplace modifications;
• promote actively the placement of disabled transport accident victims in employment; and
• provide financial incentives (including assistance with workers’ compensation premiums) to prospective employers.

The Scheme makes available financial counselling services to transport accident victims and has power to make or guarantee loans to such people to start or maintain a business.

4. Social Rehabilitation

The Scheme provides leisure counselling, assistance for independent living, family counselling and other services necessary for social rehabilitation.

D. Support Services and independent Living

Disabled transport accident victims require support services to compensate for the inability to perform everyday tasks. Other forms of assistance are necessary for independent living and to avoid institutionalisation. The Scheme applies the principle that the highest priority should be to meet the needs of the most seriously disabled.

1. Household Services

Where the disabled person performed substantial household services before the accident, replacement services are provided to the extent necessary for the maintenance and preservation of the household.

2. Attendant Care

A person disabled in a transport accident, whether temporarily or permanently, is entitled to attendant care services required to provide for his or her personal care.

3. Emergency Family Support

Emergency family support is payable for a limited period to immediate family members who have to attend the transport accident victim continuously.

4. Accommodation

A transport accident victim suffering long-term physical disability is entitled to the cost of necessary modifications to his or her residence. Modifications may be required on more than one occasion. The Corporation also makes loans to finance the purchase of a home.

5. Mobility

A mobility allowance of 5 per cent of AWE ($21 in June 1984) is paid to disabled transport accident victims who cannot use public transport. The Scheme also meets the cost of necessary vehicle modifications for such people.

E. Compensation for Permanent Disability

Lump sum compensation related to the degree of permanent disability suffered by a transport accident victim, is payable up to a maximum of 208 times AWE at the time of payment($87,360 at June 1984). Variations are made to the amount of compensation payable, depending upon the age of the disabled person. No compensation for permanent disability is payable where the degree of disability is 4 per cent or less. If the assessed degree of disability is 90 per cent or more, the maximum amount is payable. Compensation for permanent disability is paid in addition to all other benefits.

The degree of disability is assessed using an Australian adaption of the American Medical Association’s Guides to the Evaluation of Permanent Impairment, which adopts a “Whole Person” approach to the assessment of disability. The Whole Person approach is comprehensive in the range of impairments covered and includes, for example, loss of limb or organ function loss of sexual and reproduction capacity and disfigurement.

Generally compensation for permanent disability is assessed 12 months after the date of accident, though earlier payment is possible where the disability is clearly permanent. Interim payments can be made where the degree of permanent disability cannot finally be assessed, but some disability is evident.

F. Compensation on Death

1. Eligibility

On the death of a person in a transport accident

• a dependent spouse;
• dependent children; and
• other dependent relatives

are entitled to compensation “Dependence” is not confined to financial dependence, but includes interdependence.

2. The Surviving Spouse

A dependent spouse may claim the following benefits.

• The spouse is entitled to the whole or a share of a standard lump sum of 130 times AWE at the time of the accident ($54,600 at June 1984). The share varies according to whether other dependents can also claim part of the lump sum. The lump sum is payable whether the deceased was an earner or non-earner.
• Where the deceased was an earner, a spouse with child-care responsibilities receives periodic compensation for loss of support regardless of the spouse’s own earnings. The compensation is paid f or a period of up to five years at the rate of 50 per cent of the deceased s net earnings. A spouse with child-care responsibilities who has special needs receives limited compensation for loss of support beyond the five year period.
• Where the deceased was an earner, a spouse who has no child-care responsibilities but is in poor health is over 50 years of age and lacks work skills, or is caring for an aged or infirm relative, receives limited compensation for loss of support for up to five years.
• A spouse may be entitled to replacement household services for a period of up to two years, depending on the extent of the services provided by the deceased and certain other factors.

3. Dependent Children

Dependent children may claim:

• a share of the standard lump sum;
• periodic compensation of 8 per cent of AWE ($33.60 at June 1984), regardless of compensation paid to the surviving parent; and
• replacement household services.

4. Other Family Members

Other family members who were dependent upon the deceased may claim a share of the standard lump sum.

5. Funeral Expenses

The Scheme meets reasonable funeral expenses of a person killed in a transport accident.

G. Medical, Hospital and Related Expenses

1. Medical and Hospital Services

Prompt and effective medical and hospital treatment is provided to transport accident victims through the general health care system on the same basis as it is provided to other sick and disabled members of the community. Medical services, for example, are provided through Medicare and service providers are paid in accordance with procedures established by Medicare.

The cost implications of extending general health care arrangements to transport accident victims is to be the subject of negotiations between the State and the Commonwealth. It is appropriate, given the savings accruing to the Commonwealth from the Scheme, that it should provide a substantial subsidy, preferably by financial integration of the Scheme and the general health care system in relation to medical hospital and related services.

2. Ancillary Services

The Scheme provides ancillary services, such as physiotherapy, occupational therapy, dental and optical services and home nursing care, to transport accident victims. For this purpose arrangements are negotiated with service providers. Appropriate arrangements are also made for nursing home and long-term institutional care required by transport accident victims.

H. Scope of the Scheme

1. Coverage of the Scheme

The Scheme covers any person killed or injured in a transport accident, where any two of the following three criteria are met:

• the person is a New South Wales resident;
• the accident occurred in New South Wales; or
• the means of transport involved was registered in New South Wales or was operated by a State authority.

In general, the Scheme does not provide benefits to people not resident in Australia at the date of the accident.

2. Work-Related Accidents

Actions Against Employers

A worker’s right to claim common law damages from a negligent employer for a transport accident occurring in the course of employment is unaffected by the Scheme.

Workers’ Compensation

A worker injured in a transport accident, which is also covered by the workers’ compensation system, retains his or her right to seek workers’ compensation.

3. Compensation from Other Sources

A person who has rights to compensation under another scheme or system including workers’ compensation, has three months in which to decide whether to proceed under the Scheme or to enforce the other rights. A person electing to proceed under the Scheme must account for compensation received from another source, and his or her entitlement under the Scheme Is reduced accordingly. An exception is that a person entitled to workers’ compensation, upon electing to claim under the Scheme, may retain certain workers’ compensation benefits Such as compensation for the first five days incapacity.

Compensation under the Scheme is not to be affected by the receipt of collateral benefits from other sources, such as insurance policies, pensions schemes, or superannuation funds.

4. Indemnity

A New South Wales resident who incurs common law liability in a transport accident in another Australian jurisdiction while driving a New South Wales vehicle is indemnified against that liability.

5. Exclusions

Compensation under the Scheme is not payable:

• for intentionally self-inflicted death or bodily injury;
• for death or bodily injury sustained by a person while committing a serious crime of violence; or
• while a person is in prison.

I. Administration of the Scheme

1. Principles of Administration

The Accident Compensation Corporation administers the Scheme in accordance with five principles:

• entitlement of transport accident victims to compensation;
• independence of the Scheme from the Government of the day;
• flexibility in administration;
• high-quality decision-making; and
• speed in decision-making and in providing compensation.

2. Corporation’s Functions

The Corporations functions include claims assessments the provision of benefits and services, the formulation of policy and the promotion of safety and accident prevention. The Corporation has a duty to inform the public about entitlements under the Scheme and to seek out potential claimants to ensure their needs are met. The Corporation administers the Scheme on a decentralised basis.

3. Policy Review Committee

An independent Accident Compensation Policy Review Committee reviews the practices of the Corporation and the Scheme generally and recommends changes to the Government and the Corporation.

J. Decision-Making: Assessment and Appeals

1. Assessment

The Corporation assesses and investigates claims for compensation. However, it is also under a duty to assist accident victims to present their claims and to further assist claimants, by providing funds to enable independent or other organisations to engage claimant-representatives. A claims manual, which details the practices and policies of the Corporation, is made available to the public.

The determination of each claim is the responsibility of a single assessing officer, who has the authority to make the necessary investigations and decisions. The claimant is notified of an adverse decision within 14 days and given reasons for the decision.

2. Appeals

The appeal structure is designed to provide an opportunity for full review on the merits of Corporation decisions, yet to avoid formality, delay and substantial costs. The structure is based on the federal system of administrative appeals, with particular reference to social security appeals.

The appeal structure is two-tiered. The first appeal lies to an independent compensation Review Panel, of three members, with a legally qualified chairperson. The Panel conducts appeals speedily and informally and has power to substitute its own decision on the merits for that of the Corporation. An appellant may be represented by a person of his or her choice, whether or not legally qualified. A successful appellant is reimbursed for the necessary costs of appeal including legal costs, in accordance with a modest fixed scale.

The second level of appeal is to the Accident Compensation Appeal Tribunal, which is constituted by a judge and two non-judicial members with relevant expertise. Like the Panel, the Tribunal is not bound by the rules of evidence and conducts proceedings with as little formality and technicality as fairness permits. The Corporation is a party to these proceedings, and legal representation of the parties is more common than before a Panel. The Tribunal has power to award costs. An appeal on a question of law may be taken to the Court of Appeal.

K Funding

1. Sources of Funds

The Scheme is financed on a pay-as-you-go basis from the following sources.

• Motor vehicle owners pay contributions, in the same manner as compulsory third party motor vehicle premiums have been paid. Contributions vary according to the risks associated with the use of particular classes of vehicles.
• The holder of a driver’s licence pays a levy on issue or renewal of the licence. The levy may include a penalty loading to take account of a poor driving record.
• Public transport authorities meet the costs of compensation arising from accidents in which they are involved.

A subsidy is also to be sought from the Commonwealth to take account of the savings and additional revenue to the Commonwealth from the Scheme. Ideally this should take the form of a contribution to the cost of providing hospital and medical treatment to transport accident victims.

2. Cost

The estimated cost of the scheme, on a “plateau” pay-as-you-go basis, is $177 per vehicle per annum. This estimate does not take into account any possible Commonwealth subsidy. The estimated cost of the current third party system on the same basis, is $225 per vehicle per annum.