What's
it about?
There are plans afoot to limit the amounts that Australians will be able to recover in
negligence lawsuits. As well, there would be constraints in the ability to sue doctors and
adventure travel companies (and the like). It is hardly surprising that this proposition,
contained in a Federal Government review, has caused wide-ranging reactions. Would you be
surprised that the medical lobby, together with the insurance industries, are very much in
favour of the proposal? How about lawyers? On the whole they appear to disapprove. And the
Australian Competition and Consumer Commission (ACCC) is concerned at the intrusion into
consumer rights. The Victorian Government has weighed in as well. They want to cap
personal injury awards, as well as other limits, as part of an overall effort to address
rising insurance premiums.
The insurance crisis has dominated our news media over the past year, especially
concerning the plight of community and voluntary groups who cannot get public liability
insurance, or must pay premiums hikes as high as 1000 per cent. It has not been unusual
for voluntary groups to pay more in premium costs than the income they receive from the
public events the insurance covers.
Who is for &
against
There is a battery of high profile professionals and bodies arrayed against these
proposals. Professor Fels, Chair of the ACCC, put it this way: "We can't think of any
circumstance where it is or should be acceptable for a supplier to mislead or deceive a
consumer causing injury or death." The lawyers agree: they see no real connection
between the rise in public liability insurance and the volume of litigation.
The Australian Medical Association believes the proposals would ease the fears of their
member doctors, many of whom now claim to be under pressure from the threat of medical
malpractice lawsuits and exorbitant premiums.
Why is insurance scarce?
How often nowadays do you hear of yet another small business driven to the wall because
they cannot secure public liability insurance? We have Governments, local and State,
rescuing public swimming pools from the brink of closure; recreational clubs forced to
shut down; and myriad other small business that cannot service their clients without
insurance cover. Why is this so?
It is a world-wide problem. In an example cited by the U.S. General Accounting Office,
an insurance company offered to cover a portion of a building's worth for a premium of
$800,000. Before Sept. 11, the building was fully insured for a premium of $60,000. That
date, of course, was the attack on the World Trade Centre in New York. In another case, a
building company in New York could not find a bank to provide financing for a proposed
apartment complex because the building contractor could not get secure terrorism
insurance. The project would have employed five hundred building workers.
There are any number of possible reasons for the insurance crisis: the September 11th
terrorist attacks and the consequent re-insurance problems; reduced profitability for
insurance companies; the collapse of the HIH insurance group; increasing litigation.
What's the solution?
In this debate there is no agreement about the nature of the problem, and therefore
little room to move towards resolution. For instance, the Queensland Law Society believes
that the solution to the public liability insurance crisis lies in a community effort to
pool their cover in group insurance schemes. Along with many groups, lawyers'
representatives believe that proposed caps to negligence pay-outs do not address the
problem - it might be said that, on the whole, lawyers' groups blame the dynamics of the
insurance industry and market conditions for the crisis. They believe, with some
justification, that it is up to a Court to decide whether a person's injuries warrant a
damages pay-out. "Problems in the insurance market are principally insurance
problems, not problems of the legal system," said Law Council President, Tony Abbott.
The Law Council of Australia's submission to the first phase of the government's
Negligence Review Panel argued for a collection of moderate changes to the law, rather
than drastic legislative changes and interference in the judicial system. The problem for
lawyers, as a group, is that there is little public sympathy for them, especially
so-called plaintiff lawyers - until, of course, you are the victim of an injury and you
need a lawyer to prosecute your claim!
It does seem that consumers need to better understand the basic legal components of
duty of care and negligence. It's not enough to simply bury our heads and hope the
insurance crisis will go away - like all public issues that arise from scarcity, we must
ensure that as far as possible we avoid injury and accept some responsibility for our own
actions. The Law Council has also proposed that that an action for negligence could not be
advanced unless the risk of a person's actions causing harm was more than 'remote or
fanciful'. It also seems sensible to reduce the time limit that can pass before a claim
can be made for alleged negligence, as well as making people who undertake
"risky" recreational activities accept the actual risk inherent in the activity.
There are no easy solutions to the insurance crisis, and little can be done about
market conditions in the insurance industry, but the community should be cautious when
asked to overturn the legal system and the discretion of judges and juries to make
reasonable awards. On the other hand, where giddy litigants look to work the system, it
would be best to use legislation to make sure they have a bona fide claim before they can
plead their case.
By Geoffrey Winn
Creative Director
www.law4u.com.au