Official Attempt To Limit Compensation Payouts
'Hockey To Crack One Tough Nut' by Chris Herde The Gold Coast Bulletin 23/1/2002

The Government is proposing to stop the dramatic increase in public liability insurance premiums with the creation of a national accident compensation scheme with fixed payouts.

The scheme, bitterly opposed by the legal profession, could mean the end of a person's right to sue for unspecified personal injury damages.

As a lawyer himself, Small Business and Tourism Minister Joe Hockey must be aware that, in taking on the legal profession, the Federal Government is setting its sights on a formidable foe. Mr Hockey has acknowledged the role of the collapse of HIH and September 11 on skyrocketing premiums which in some cases have pushed insurance charges up more than 700 per cent in a year. However, he has also laid a portion of the blame squarely on so-called greedy lawyers.

A former lawyer, Mr Hockey says the Australian legal system has taken on some of the more unsavoury aspects of the legal system in the US. That is, lawyers offering a no-win, no-fees system are prompting a public armed with frivolous claims to become litigious.

Mr Hockey said that this has helped to boost public liability claims from 55,000 per annum in 1998 to 88,000 in 2000. The strain on the industry is reflected by insurance companies in 2000 collecting $300 million less in premiums than they paid out. What's at stake, says Mr Hockey, is the Australian love of the outdoors.

"Of course there are a large number of payouts that are totally justified," he said. "However, where someone trips over and sprains an ankle, I don't think the first thing they should think of is going to see their lawyer. One of the reasons why this has come about is because we've had the development in Australia of an Americanised-type of legal system. We can't have a legal system that's akin to pulling the lever on a poker machine."

The Federal Government's scheme would be similar to a New Zealand system whereby businesses pay a levy into a government-controlled compensation fund and put a cap on the level of benefits. Its supporters say that it would also reduce costly, time-consuming litigation, and quickly identify and deal with unjustified claims.

However, Australian Plaintiff Lawyers' Association president Rob Davis said that the proposals were 'silly'.

"What they're trying to do is take away rights that belong to you, me and everybody else in society," he said. " There's no need for change; All we need to do is wait until the insurance market itself improves."

He said that only small businesses and the insurance companies would receive any benefit out of a national compensation scheme.

Yet the problem remains that thousands of small businesses around the country have either gone, or are on the verge of going, out of operation because of insurance premiums. The situation is especially acute in the tourism industry. Personal liability premiums for businesses such as horse riding have increased by more than 700 per cent in the past year. Even in laid-back small businesses such as Snowy Mountains Fly-fishing Adventures, premiums have risen from $600 to $2500, or 317 per cent. The Big Banana, at Coffs Harbour in NSW, has had its insurance jump from $39,900 to $140,000 in one year.

Mr Hockey will need help to tackle the personal liability insurance issue from state and territory governments. Victorian Premier Steve Bracks was concerned with abolishing people's right to sue if they were injured in an accident. "I think there is a problem with that course of action," he said. Last year his Government restored workers' common law rights to sue negligent employers if they were injured while at work, after the rights were abolished by the former Kennett government.

Queensland Premier Peter Beattie was prepared to sit down and work with the Federal Government.

"I have not seen the detail and have not seen what he is proposing but I'm prepared to have a look at it," he said, "but I want to make sure that individuals aren't disadvantaged and I want to ensure that people are appropriately covered."

The legal profession, too, will not want to be disadvantaged, and seems certain to mount a strong case in a bid to prevent government intervention.