On 30 May 2013, the Victorian Competition and Efficiency Commission (VCeC) was asked by the Victorian Treasurer, in conjunction with the Attorney-General, to conduct an inquiry into aspects of the Wrongs Act 1958 (Vic) (Act) (Inquiry).

The Inquiry is a reaction to growing concerns that the reforms made to the Act in 2002 and 2003 (Tort Reforms) treat plaintiffs inconsistently and have imposed unreasonable limitations on a plaintiff’s ability to receive fair compensation for their injury.

An Issues Paper was recently released1 and the Inquiry has been consulting with stakeholders.2

Background

At common law, damages for personal injury or death are awarded in accordance with the compensatory principle which seeks to restore a plaintiff to the position they would have been in if no wrong had been committed.  The combined effect of the compensatory principle, and the perceived ease with which plaintiffs were establishing liability for negligence, resulted in extremely high insurance premiums.

The tort reforms sought to address rising public liability and professional indemnity insurance premiums by amending the Act so as to:

  • place limits on the amounts available to plaintiffs for compensation for personal injury and death, for both economic and non-economic loss;
  • create impairment thresholds for personal injury in relation to damages for non-economic loss;
  • apply discounted rates to lump sum damages awarded for future economic loss; and
  • place limits on damages for gratuitous attendant care.

These limits and thresholds are now deeply embedded in the manner in which courts currently assess damages for economic and non-economic loss.  The Inquiry does not intend to dispose of these limits and thresholds, but rather, seeks to “clarify or alter the circumstances in which (the limits and thresholds are) applied to address any anomalies, inconsistencies and inequities”.3

Current limitations

The Act places the following limitations and thresholds on a plaintiff’s award for damages for personal injury.

  • A plaintiff can only receive damages for past and future economic loss up to an amount that is not more than three times the total average weekly earnings for all employees in Victoria.
  • A plaintiff can only be awarded damages for non-economic loss if his or her injury is a ‘significant injury’ as defined by the Act.  Further, the amount that a plaintiff can be awarded is capped.
  • A plaintiff will be awarded damages for gratuitous attendant care only if they require at least six hours per week for six months after the injury has been suffered.  This amount is also capped.
  • Damages for gratuitous attendant care for others are only awarded if the plaintiff would have provided gratuitous care to dependants for at least six hours per week for six months prior to the injury or death. This amount is also capped.

Considerations

The VCEC has outlined, in broad terms, the potential issues that will inform any recommended amendments to the Act.  For example, it will consider the applicable limits and thresholds imposed by the Act in the context of other Victorian legislative regimes that compensate plaintiffs for personal injury, such as workers compensation and transport accident schemes.

In recommending any amendments to the Act, the VCEC says it will consider the impact that such amendments would have on key decision-making and administrative bodies, including courts and medical panels.

What does this mean for insurers?

The removal or scaling back of limitations and thresholds under the Act, may ultimately lead to insurers paying greater amounts of damages to a plaintiff than they would otherwise be liable to pay under the Act as it currently stands.

It will also be interesting to see how the VCEC balances the interests of different stakeholders in the community.

The task before the VCEC is complicated in circumstances where it will be required to preserve and uphold the intended benefits of tort reforms, while at the same time, frame its amendments to the Act in a manner that will address the perceived inequalities and inconsistencies resulting from those reforms.