Australia: The Government's 5% threshold for common law claims in Queensland: What does this mean for insurers and employers?

Last Updated: 17 October 2013
Article by Terry Killian
Focus: Common law damages claims in Queensland
Services: Insurance
Industry Focus: Insurance

The Attorney-General, Jarrod Bleijie, today announced that contrary to the recommendation of the Inquiry into the Operation of Queensland's Workers' Compensation Scheme, the Government would introduce a 5% degree of permanent impairment (DPI) threshold, below which an injured worker is unable to make a common law damages claim in Queensland. The Workers' Compensation and Rehabilitation Act and other Legislation Amendment Bill 2013 was immediately introduced into parliament.

This is the first occasion on which thresholds have been introduced in Queensland.

Based on the 2013 Q-Comp Annual Report, the new threshold would eliminate more than 46% of all common law claims lodged in Queensland in the 2013 financial year. While this figure may be illusory for reasons we discuss below, the impact on the scheme will nonetheless be significant.

The pros and cons of thresholds have been covered exhaustively in both the submissions to the Parliamentary Inquiry and the subsequent report. However, now that a decision has been made, there are a few key things that insurers and employers should know:

  1. When will the changes take effect?

The changes take effect from today, 15 October 2013. The threshold applies to injuries sustained on or after that date (or, in the case of injuries sustained over a period of time, the first consultations with medical practitioners on or after that date).

The changes are not retrospective. As a consequence, employers and insurers can expect a significant short-term spike in the number of common law lodgements.

  1. How is the degree of permanent impairment assessed?

A new concept of DPI has been introduced. A worker must have a DPI of more than 5% to satisfy the threshold. The newly created office of the Workers' Compensation Regulator, which replaces Q-Comp, must make guidelines for assessing a worker's DPI. These guidelines will play a crucial role in the new scheme.

  1. How will the threshold be applied?

Queensland already has a unique "access to damages" gateway which, in the ordinary course, requires an injured worker to obtain a notice of assessment (including an assessment of permanent impairment) before being entitled to seek common law damages.

The new threshold will be applied at this stage of the process, meaning that the assessment of DPI by the insurer, which was previously largely ignored in the common law process, will now be critical.

  1. What does this mean for insurers and employers?

Insurers and employers can, as a result of the proposed changes, expect:

  • The proactive involvement of claimant's solicitors in the statutory claim phase, including the commissioning of specialist medical evidence leading up to the Insurer's assessment of DPI. Assessments of impairment by External Medical Officers are likely to become less common.
  • Increasing numbers of claims including multiple injuries, although it appears secondary psychiatric injuries will not be able to be added to physical injuries to overcome the threshold.
  • A significant increase in the number of referrals to the Medical Assessment Tribunal (MAT) over disagreements with insurers' assessments of DPI. This is likely to lead to significant delays in the finalisation of claims, due to capacity constraints within the MAT itself.

As noted above, just over 46% of the 4292 lodgements in the 2013 financial year were assessed to have a work-related impairment of less than 5%. In our view, it would be overly simplistic to expect that the amendments will reduce common law lodgements by nearly 2000 claims per year.

The actual proportion of claims excluded by the proposed threshold will not be known until the amendments have been operational for a reasonable period. Only then will it be possible to meaningfully assess whether, on a cost / benefit basis, the amendments have resulted in any material savings to the scheme.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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