Editors --- "Opinion: The rush to law reform in personal injuries" [2003] AltLawJl 66; (2003) 28(5) Alternative Law Journal 210

• OPINION
• The rush to law reform in personal injuries
• First wave reforms
• Second wave reforms
• Third wave reforms?

OPINION

The rush to law reform in personal injuries

In the last 12 months governments across the country have rushed into legislation which significantly diminishes the rights of injured Australians. This period has bought about an unprecedented amount of legislative change in personal injuries law in every Australian jurisdiction.

The so-called 'indemnity crisis' was heralded last year with the collapse of the giant United Medical Protection (UMP) indemnity organisation. This coincided with a sharp rise in public liability insurance premiums which threatened the viability of small businesses and community organisations. The insurance industry lobby seized this opportunity.

In order to respond to the public concern generated by the insurance industry, the Commonwealth sought quick solutions. The focus of its interest was tort law, commissioning a review panelled by a NSW Supreme Court judge, Justice Ipp. The panel's Terms of Reference asserted that the 'award of damages for personal injury has become unaffordable and unsustainable as the principal source of compensation for those injured through the fault of another'.^[1]

Not surprisingly, the eventual recommendations of the lpp Report were designed specifically to reduce the number of claims being made.

First wave reforms

The Victorian Government introduced the first round of amendments in late 2002 and they apply to all public liability and medical negligence cases. These included:

• A reduction in the limitation period for adults with personal injury claims from six to three years, with an ex­ emption to children and the intellectually disabled.

• A cap on general damages of$371,000.

• A cap on damages for loss of earnings and earning capacity, so the court must disregard any income lost by the plaintiff above three times average earnings.

• A change in the 'discount rate' for lump sum payments from 3% to 5%. This is the figure used to calculate future economic loss a:. an immediate lump sum payment. This change alone can wipe hundreds of thousands of dollars from claims that have a large component for future care needs, reducing the compensation of those who are injured the most.

Second wave reforms

Not content with these changes, or prepared to allow time for them to be assessed in practice, the Victorian Government announced further amendments in May 2003.

These included:

• A requirement that a person have a 'significant injury' before a general damages claim could be made. In most cases 'significant injury' will be assessed using impairment thresholds based on American Medical Association Guides Fourth Edition (the Guides). These require a greater than 5% whole person impairment for physical injury and greater than 10% for psychiatric injuries.

• A limitation period of six years for children and intellectually disabled plaintiffs.

• Introduction of 'discoverability' for determining limitation periods, as long as the claim is commenced within the maximum 'long-stop' of 12 years from the negligence.

• A threshold on recovery of damages for gratuitous assistance (known as the Griffiths v Kerkemeyer component of damages). Such claims can only be made where assistance was required for six hours a day over a period of six months.

These changes were retrospective. Thus, all claims not filed before 1 October 2003 came under the new laws, whether or not the injury occurred before the laws were passed. This has caused a recent 'spike' in the amount of claims filed.

The Guides and medical negligence cases

Among the various draconian measures of the second wave re­ forms, the use of American Medical Association Guides has caused the greatest concern.

The Guides have been used to set thresholds in employment and transport accident schemes for many years. The arbitrari­ ness of these guides regularly results in different doctors arriving at very different impairment percentages. Disputes over assessment and outcome often lead to expensive litigation be­ fore the substantive issues of a claim are determined.

However, the Guides are particularly unsuitable for complex medical negligence cases. First, unlike the employment and transport accident systems, common law negligence is not underpinned by no-fault compensation. People injured as a result of a medical mishap cannot apply to a statutory body to cover the cost of treatment or lost earnings. Although economic loss may still be claimed, few plaintiffs will be willing to proceed with litigation unless there is a real prospect for general damages or economic costs are very high.

Secondly, injuries in medical cases can be entirely different to other areas. While the Guides are very specific in limb and back injuries, they lose specificity for the types of injuries, particularly internal injuries, that may result from medical treatment. For example, while the Guides devote 124 pages to 'The Musculoskeletal System' they contain only 13 pages on 'The Urinary and Reproductive Systems'. Without too much difficulty a lay-person can determine that the loss of a forefinger assesses at 4% whole person impairment. By contrast, the section which deals with kidneys, male and female reproductive organs, genitals and urinary tracts provides only broad and vague categories of impairment. The loss of a fallopian tube in a pre-menopausal woman is assessed between 0% and 15% whole person impairment. Whether such an injury is above or below 5% will be unavoidably arbitrary as the Guides offer little help to the doctor making the assessment. Clearly, the insufficiency of the Guides was recognised by the government, as they have made some exceptions for cases involving loss of a breast or foetus. If the Guides were adequate for medical negligence claims, such exceptions would not be necessary. Nevertheless, the exceptions have brought their own arbitrariness: a mother may be compensated if her baby is stillborn as a result of negligence but not if her baby was born alive but dies a few days later as a result of mismanagement of the labour.

A further problem is that assessments will be performed by doctors. The apprehension of bias in the assessment process will seriously erode confidence in the legal system. Plaintiff lawyers already have a difficult time finding doctors prepared to criticise the performance of their peers. Under the new process, assessments will be ultimately performed by medical panels, with no right of appeal. Given the pervasive anti-litigation attitude of the medical profession, bias and the perception of bias is inevitable when medical panels a8sess injuries in medical negligence claims.

Finally, the people most disadvantaged by impairment thresholds are those who suffer serious injury as a result of negligence, but have no permanent impairment. This is because the Guides only recognise injuries that are permanent. Yet surgical errors, such as an injury to the gallbladder or ureter, which may require multiple operations to repair, extensive hospitalisation and long-term debilitation, will not always result in a permanent impairment. Other cases may involve a serious departure from the standard of care but will provide limited legal redress for the patient involved, such as the case of a woman on whom the wrong operation was performed so that carpal tunnel decompression occurred, instead of removal of a ganglion. As no permanent injury resulted she may not recover general damages, regardless of the months of pain endured because of blatant negligence. Similarly, unless a parent can show an ongoing psychiatric impairment of greater than 10%, an extremely high threshold, no claim will arise from the death of a child, no matter how serious the negligence.

Third wave reforms?

The Victorian Government has foreshadowed yet another wave of lpp-inspired changes. These will include the 'codification' of the common law of negligence.

Such changes are likely to further reduce the discretion of courts to determine cases on their merits. If implemented, they will erect more and higher hurdles for plaintiffs to jump before they can recover compensation for personal injuries to which they should be entitled.

Despite the alleged and oft-quoted 'insurance crisis', insurers have returned to massive profits recently. But the cost to in­ dividual victim!! of medical negligence cannot be measured. It will continue to be borne by patients for many years to come. The pendulum has swung too far in favour of insurance profits over individual rights. ·

Kathryn Booth and Jacob Varghese

Kathryn Booth and Jacob Varghese are medical negligence lawyers at plaintiff law firm Maurice Blackburn Cashman, Melbourne.

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^[1] Terms of Reference, Review of the Law ofNegligence, Depart­ ment of Treasury <http://www.revofneg.treasury.gov.au/content/terrnsofref.asp> at 23 October 2003.