Public Liability Insurance6th June 2002
Many of the readers of this website are committee members of running clubs or race directors for events, or volunteers of either/both. Therefore many runners have direct involvement with the worsening situation regarding Public Liability Insurance. This has been directly responsible for the cancellation of many events, and adding to the cost burden of all others. I have tried to find a fairly reasonable explanation of the moves currently being discussed to remedy the situation. This is presented below. As it deals with the law and insurance, it is a long and fairly tedious read - however ignornace will not help you in a court of law. Note that there are various exemptions (and loopholes) that relate to "risky activities" and "sports" so don't assume that YOU will be covered !
Kevin Tiller, Administrator of CoolRunning Australia
Commonwealth, State and Territory Ministers and the President of the Australian Local Government Association (the Ministers) met to continue work on addressing issues associated with the availability and affordability of public liability insurance. The meeting followed on from a highly successful meeting held in March.
Ministers noted that a number of jurisdictions had already undertaken a range of initiatives since Ministers last met in March - particularly in the areas of tort law reform, facilitating pooling and group insurance for not-for-profit organisations and the development of risk management guidelines. Some recently announced tort law reform and other measures are shown in Attachment A. (see below...)
The Ministers made substantial progress on developing consistent national approaches for implementing measures to tackle the problems of rising premiums and reduced availability of public liability insurance.
Ministers met with the Insurance Council of Australia and chief executives of some major insurers and made it clear that there is an expectation that the insurance industry will deliver affordable public liability products to the community on the basis of the reform package being implemented.
Ministers agreed on a package of socially responsible measures aimed at reducing and containing claims costs and increasing the transparency of insurance industry practices through better data collection.
Given the substantive initiatives undertaken by Governments, Ministers called on insurers to respond to the difficulties in the public liability insurance market and participate in developing sustainable and affordable cover for the Australian community.
Role of the ACCC
Ministers agreed that the ACCC's role was crucial to monitoring progress in relation to public liability and general insurance premiums. The ACCC will monitor market developments and premium prices and the Commonwealth will review the ACCC's involvement (including more formal processes) if it becomes clear that cost savings are being made but not passed through to consumers.
The Commonwealth has asked the ACCC to update its 'Insurance Industry Market Pricing Review' report by July 2002. The Commonwealth will provide the ACCC with a standing brief to continue to update this report on a six monthly basis over the course of the next two years. This ongoing monitoring role will enable an assessment of whether the insurance industry is adjusting premiums to take account of cost savings, and provide the gauge for the effectiveness of measures taken on a national basis to stabilise and contain claims management costs as reflected in public liability premiums.
To ensure increased availability of public liability insurance cover, Ministers also called on the insurance industry to play a proactive role in facilitating group buying and pooling arrangements, especially for community groups.
Volunteers and Not-For-Profit Organisations
A number of jurisdictions, including the Commonwealth, will introduce legislation to protect volunteers from being sued by providing an indemnity from the organisation for which they work. The legislation will be analogous to that enacted in South Australia.
Ministers noted that the rising cost and limited availability of public liability issues is a particular problem for not-for-profit community organisations. Accordingly, they have agreed, as a matter of urgency, to examine the costs and benefits of exempting eligible not-for-profit organisations from common law damages claims for death or personal injury (other than for intentional torts) and develop options as appropriate.
Notwithstanding substantial progress, Ministers agreed that further reform was necessary. Ministers agreed that reform proposals should satisfy one or more of the following objectives:
- Cost reduction;
- Cost containment;
- Increasing certainty and predicability of costs of claims for insurers which, based on evidence presented by the Insurance Council of Australia, is critical to containing premium increases in the short to medium term
- Managing community expectations about personal responsibility and assumption of risk.
- Tort Law Reform
Ministers are committed to achieving a range of targeted and broad based reforms designed to contain the costs of claims and to deliver predictability for the pricing of insurance products.
Ministers noted that, based on expert advice provided to the meeting, rising claims costs were a particular problem in New South Wales but that all jurisdictions had experienced increases in claims costs above growth in average weekly earnings.
Ministers noted that New South Wales and Queensland had recently announced their intention to introduce broad ranging tort law reforms. Western Australia has also announced in principle support for a range of measures as part of the national approach. Progress by States in these areas is set out in Attachment A.
Waivers for Risky Activities
The Commonwealth will legislate to allow self assumption of risk for people who choose to participate in inherently risky activities such as adventure tourism and sports, subject to preserving adequate protection for consumers in the Trade Practices Act.
The States committed to introducing mirror legislation where required.
Review of law of negligence
Unpredictability in the interpretation of the law of negligence is a factor driving up premiums.
The Commonwealth, States and Territories have agreed to jointly appoint an expert panel of three eminent persons to examine the law of negligence, including its interactions with the Trade Practices Act 1974. The review will also consider the liability of public authorities and joint and several liability. The panel will report by August 2002 after consultation with the Standing Committee of Attorneys-General. Terms of Reference for the Review and appointment of the panel will be announced shortly following agreement between governments.
Ministers agreed that all States and Territories would examine the desirability of aligning damages under common law more closely with statutory third party insurance awards for other personal injury claims.
The range of measures to be considered in each jurisdiction, if not already done so, includes:
- Bringing general damages awards and economic loss into line with caps and thresholds available in each jurisdiction's statutory schemes;
- Pre-judgement interest on damages awards, where it exists, to be set at the 10 year Commonwealth bond rate;
- The discount rate for damages to be set by statute at 5%, unless a higher rate already applies;
- Limits to be placed on the circumstances and amount of damages for gratuitous attendant care;
- Set the statute of limitations period at 3 years for all personal injury claims with provisions to protect minors. Western Australia has commenced a separate and comprehensive review of its limitations legislation;
- Prohibit the recovery of damages if the injured person was engaged in a criminal activity and providing that the taking of recreational drugs (including alcohol) is taken into account as contributory negligence.
- Structured Settlements
Ministers noted that Commonwealth legislation for structured settlements is scheduled to be introduced next week. Structured settlements allow compensation payments to more closely match the settlement against the claimant's ongoing needs. The State Ministers have agreed to sponsor legislation to remove the barriers to structured settlements as an alternative to lump sum payouts.
Legal System Reforms
Ministers noted that although tort law reform is a key element in stabilising and reducing claims costs, improvements to the procedures by which the legal system assesses and determines claims would also deliver significant cost savings.
Handling of Claims
The Commonwealth, States and Territories have each, for their respective courts' jurisdictions, agreed to examine ways to improve procedures to encourage resolution of claims without resort to litigation including:
- Pre-litigation exchange of evidence whereby the notice of claim will be supported by experts' reports on liability, causation and quantum of damages;
- Compulsory conferencing prior to the commencement of proceedings, and parties possibly being required to exchange offers of settlement at or shortly after that conference;
- Changes to legal cost rules to encourage the above initiatives by the reintroduction of a scale of costs, which is set out by the court for the various activities involved in bringing a case to trial.
- Ministers expect the legal profession and insurers to contribute to the development and implementation of these measures.
Advertising by Legal Practitioners
Ministers also noted a perception that advertising of personal injury legal services, including through 'no-win, no-fee' arrangements, could encourage inappropriate social expectations about assumption of risk and personal responsibility. Ministers agreed that limits on advertising and legal fees would be considered on an individual jurisdictional basis.
Ministers agreed that the lack of comprehensive data on claims costs was a significant constraint in the appropriate pricing of premiums by the insurance industry for not-for-profit, adventure tourism and sporting groups. The paucity of data is also inhibiting the development of insurance products suitable for these sectors.
The Commonwealth has agreed to use the Financial Sector (Collection of Data) Act 2001 and require all authorised insurers operating in Australia to submit claims data to the Australian Prudential Regulation Authority (APRA) for analysis and publication. Consultations to develop a consistent methodology will begin shortly.
The States and Territories also agreed to contribute similar claims data from State insurers and local government insurance mutuals to assist in the understanding of public liability insurance.
Ministers also agreed on the need for a nationally consistent methodology for courts statistics and asked the Standing Committee of Attorneys-General to consider this as a high priority.
Benchmarking Study of Claims Processing
Ministers agreed that the Productivity Commission be asked to benchmark Australian insurers' claims management practices against world standards and report by December 2002.
Recognising that better risk management would provide long term benefits through fewer injuries and hence, claims. Ministers endorsed proposals already underway to develop guidelines for not-for-profit community, sports and charity groups. The Commonwealth indicated that it was prepared to take a leadership role where required.
Role of Insurers
Ministers' agreed that this package of reforms will over the long term deliver consistency and predictability. However, they will not address short term availability and affordability issues. Ministers therefore called on the insurance industry to respond promptly and constructively to the issues facing particular groups in obtaining public liability cover and rising premiums. Ministers agreed to consult over coming months on particular issues affecting not-for-profit organisations, adventure tourism and sporting groups.
New South Wales
The NSW Government has introduced the Civil Liability Bill 2002 to implement stage one of the Government's law reform program. It has also announced details of stage two of the Government's tort law reform program, to be introduced in the Spring Session, commencing in September 2002.
Key features of Stage 1 include:
- Upper limits for non-economic loss ($350,000) and lost earnings;
- Applications of a threshold of 15% in respect of general damages;
- New interest calculations and discount rates for damages awards;
- Limited legal costs claims in small claims;
- Penalties for making unmeritorious claims;
- Reforms to apply from 20 March 2002.
Key features to be addressed in Stage 2 of the reforms include:
- Waivers and voluntary assumption of risk;
- Establishing a realistic duty of care;
- Protection for volunteers under good Samaritan legislation;
- Defences against negligence claims for public authorities.
- Structured settlements;
- Drug and alcohol to be taken into account in assessing negligence.
The Victorian Government has acted on a sector by sector basis to assist groups most severely disadvantaged by the lack of availability and increased prices of insurance. This includes:
- The creation of a group insurance scheme for community organisations to operate from 1 June 2002, in conjunction with the Municipal
- Association of Victoria (MAV), Our Community Pty Ltd and Jardine Lloyd Thompson;
- Providing a grant of $330,000 to MAV for the development of risk mitigation activities that are linked to the community group insurance scheme;
- Providing a grant of $100,000 to adventure tourism operators to assist them prepare risk management plans and audits.
In addition, Victoria has committed to finalise a legislative package for the Spring session of parliament that includes:
- Provision of waivers that will allow people to accept responsibility for their own participation in risky activities;
- Protection of volunteers and "Good Samaritans" from the risk of being sued;
- Proper risk management and accreditation frameworks for businesses and organisations;
- Enabling substantial amounts of damages to be paid in regular instalments ("structured settlements") instead of one lump sum;
- Improvement of legal procedures surrounding claims to enable quicker, cheaper and less stressful determination in civil liability disputes;
- Ensuring that saying "sorry" does not represent an admission of liability; and
- Removing the right to claim damages where the injury was suffered through criminal activity or while under the influence of drugs.
- Victoria remains committed to working with all jurisdictions to implement a national approach to dealing with public liability insurance.
Queensland is well advanced in its group buying scheme for community based organisations with the scheme scheduled to commence on 1 September 2002.
The Queensland Government has approved the drafting of a Personal Injuries Proceedings Bill for introduction in mid-June that will, among other things, replicate the early reporting regime and early claim resolution processes adopted under the Queensland Compulsory Third Party Scheme.
Other provisions include:
- Limiting economic loss to three times average weekly earnings;
- Limiting legal costs for small claims; and
- Exclusion of jury trials.
Measures Queensland will be introducing as part of Stage Two include:
- Prohibiting the recovery of damages where the injured person was engaged in criminal activity at the time of injury (with appropriate boundaries);
- The proposal that the increase in risk caused by taking recreational drugs (including alcohol) should be taken into account as a factor in negligence and not lead to an increase in the duty of care owed by a third party;
- Waivers and self-assumption of risk (subject ot suitable safeguards for minors), which would see people waiving their right to sue before undertaking certain high-risk activities; and
- The protection of volunteers from being sued except for gross negligence, by way of an indemnity from the organisation for which they work.
Other measures Queensland will consider as part of Stage 2 include:
- Caps on general damages;
- Changes to the statue of limitations but maintaining a level of protection for minors;
- A review of the law of negligence;
- Dispensing with the concept of joint and several liability.
Western Australia recently announced in principle support for tort law reform, including:
- Limiting the cost of the general damages component of awards by bringing them into line with other personal injury compensation schemes in WA;
- Legislating to allow self assumption of risk by people who choose to engage in inherently risky activities such as tourism and sports;
- Applying a cap for the loss of earnings component of awards;
- Restricting advertising of personal injury legal services to limited factual matters;
- Ensuring the consequences of taking drugs were taken into account as contributory negligence; and
- Requiring insurers to contribute to a national data-set and to revise their strategic approach to claims management.
- The Western Australian Government is drafting legislation to provide members of volunteer organisations with qualified immunity from personal liability.
South Australia has enacted legislation to protect volunteers to government and incorporated bodes from liability for claims and has provision under its Workers' Compensation legislation to provide cover to prescribed groups of volunteers.
It already has in place pre-litigation procedures which provide opportunities for settlement of claims in an economical way. In the risk management area, it is conducting risk awareness raising and advisory sessions for tourism groups and will soon be providing similar services for volunteer and community groups.
Many community groups in South Australia have for a number of years purchased public liability insurance through arrangements managed by Local Government Risk Services. The South Australian government is working with the South Australian Local Government Association to broaden these arrangements to cover more community groups.
The South Australia Government will urgently consider a wide range of reforms as recommended, in particular a cap on payouts, self-assumption of risk ie: a waiver, no damages for those injured while engaged in a criminal activity or while under the influence of drugs (including alcohol). South Australia also supports a review of the law of negligence.
Tasmania has already implemented a number of measures to address rising public liability insurance premiums. A series of seminars on risk management for not-for-profit community groups and small businesses has been held around the State. In its 2002-03 State Budget, the Government announced that stamp duty on public liability insurance policies would be abolished effective from 1 July 2002.
Community organisations in the State will also benefit from the joint Tasmanian-Victorian 'Our Community' group buying scheme which is due to commence on 1 June 2002.
Tasmania already has in place some of the measures under consideration in other jurisdictions such as a discount rate of 7 per cent, no provision for pre-judgement interest, no damages in respect of gratuitous attendant care, and a three year statute of limitations for personal injury claims.
The Northern Territory Government has established a public liability insurance hotline to provide information and advice. It is developing risk management seminars for business and community groups, with the program likely to commence in June. It is also discussing with the Queensland Government the potential for Northern Territory not-for-profit community groups to join the Queensland group insurance scheme, and is amending the standard insurance requirements in Government contracts. The Northern Territory already has in place some of the measures under consideration (for example, a three year statute of limitation period and procedures to encourage resolution of claims without resort to trial).
Australian Capital Territory
The ACT has recently conducted a survey of 2,200 ACT community, non profit, sporting and small businesses with respect to the various types of problems they have encountered in obtaining or renewing public liability insurance policies. The survey has produced overwhelming support across all groups for the following two initiatives:
Group insurance for access to policies otherwise unaffordable or unavailable , and risk management/advisory facilities for those bodies that see the need to take closer notice of the way they conduct their activities with a view to being more risk aware. Consequently, the ACT will be seeking agreement with our State and local government colleagues in New South Wales and Victoria to allow the ACT to participate in their group insurance schemes.
The ACT will also be setting up a risk advisory service directed at our community non profit sporting and small business sectors.
The ACT is contemplating the introduction of legislation, similar to that enacted in South Australia under which protection from public liability will be extended to volunteers and good Samaritans beyond those classes (EMS, Fire-fighters) already covered by our existing statutory framework.
Australian Local Government Association
Local Government has an important role in delivering support services that underpin the 'grass roots' effectiveness of legislative measures to be implemented by federal, state and territory governments. Local Government will examine options to facilitate group purchasing schemes for not-for-profit and community organisations. Local Government will also work collaboratively with state and territory governments to significantly improve risk management skills in the community, not-for-profit and small business sectors. Local Government will consider options for the provision of risk management accreditation services to relevant community organisations, not-for-profit groups and small business, in concert with other spheres of government.