No-fault insurance will slash big payouts

THE age of big-ticket medical damages claims could be drawing to a close, with the introduction of a $6.5 billion National Disability Insurance Scheme (NDIS) set to slash the payouts to victims of catastrophic accidents.

As part of the disability overhaul – recommended by the Productivity Commission last month and broadly endorsed by both sides of federal parliament – the NDIS or a separate National Injury Insurance Scheme would pick up the bill for ongoing care costs, depending on the claim.

Victims would lose their common law right to sue for future care costs – often half of a total damages settlement under the current system – though they could still sue for other damages in a negligence claim.

“If the two schemes are introduced, then plaintiffs will no longer be able to pursue common law damages for their future care costs, which we expect will bring an end to very big claims, being those above $5 million,” David Nathan, CEO of Avant medical indemnity insurers, told MO.

Medical Insurance Group Australia (MIGA) CEO Mandy Anderson said the new scheme,  still to be examined by the government and expected to be gradually implemented from 2014, appeared to be fairer despite the smaller payouts because victims would not be required to prove negligence to win care costs.

“Patients won’t have to sue for the care component, their care will be taken care of, but they retain the common law right to sue for the balance of heads of damages for negligence,” she said.

“It’s going to come down to an industry framework [that hinges on] whether plaintiffs want to do that. It tears a large hole, so the large files will definitely reduce in size.”

The Australian Lawyers Alliance (ALA) has backed both schemes but questioned if victims should be stripped of the right to sue for ongoing care costs.

“The greatest emphasis in the disability sector over the last decade has been their autonomy and wanting to have the right to choose,” ALA South Australian director Tony Kerin said.

“If you want to have a government scheme be one that looks after you, that’s perfectly appropriate. But you shouldn’t lose the right to be able to sue for damages, to have a one-off settlement, which occurs in most of those cases, where you have the right to look after your own affairs for the rest of your life.”

Ms Anderson added that damages settlements, while they would shrink, might not shrink by the size of the ongoing care costs because victims may seek higher amounts in other damages.

Although the disability overhaul does not begin for several years, and is not expected to be fully effective until at least 2020, medico-legal insurers have already begun examining the Productivity Commission report to determine the impact on medical practitioner premiums.

MIGA has previously suggested premiums would be lowered under the new system as the result of plaintiffs with cerebral palsy being automatically covered by the NDIS. However, MO understands any drop in premiums could be offset by state levies introduced to fund the scheme.