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Wednesday, 24 December 2014

No-Fault Accident Insurance

The WA Government has released a Green Paper ( seeking comment on the possible introduction of no-fault catastrophic Compulsory Third Party (CTP) insurance for people catastrophically injured in motor vehicle accidents in WA.

Currently, CTP provides cover for drivers/owners of registered motor vehicles for personal injuries they may cause to other people as a result of a motor vehicle accident. This is an 'at-fault' scheme where you must assert fault against a driver of a WA registered vehicle in order to make a successful insurance claim. Vehicle passengers, pedestrians and cyclists can also claim against an at-fault driver to obtain compensation for their injuries from motor vehicle accidents.

In the CTP scheme, if you are at fault, no claim can be made and if you are partly at fault, the compensation you are entitled to may be reduced. There are also problems in the event that the vehicle is unregistered and uninsured.

The Commonwealth Government has proposed that existing State and Territory CTP schemes be expanded to provide care and support to all people catastrophically injured as a result of a motor vehicle accident irrespective of fault. Catastrophic injures are defined as spinal cord injuries, traumatic brain injuries, multiple amputations, severe burns or permanent traumatic blindness.

The STC has made a submission, the text of which is below, arguing that the scope of the proposed scheme is too limited and should be expanded, at least in the longer term, to cover a wider range of injuries and any type of accidental injury in a public place.

The STC supports the intent of the green paper on no-fault insurance but submits that it has important limitations that should be addressed either from the start or as part of a longer-term strategy to reduce uncertainty and costly litigation over accidental injuries sustained in public places.

The STC submits that the scheme as outlined in the green paper is a good starting point, but is too restrictive as a long-term strategy. In particular, the proposed scheme should be seen as an initial step towards:
a) a lower threshold for injury severity than envisaged in the green paper;
b) a no-fault transport insurance scheme; and, ultimately,
c) a comprehensive personal insurance scheme covering all accidental injuries, as is the case in New Zealand.

With respect to (a), the injury severity of a crash is often an idiosynchratic outcome (a specific type of crash will have a range of injury outcomes) and a too-high threshold will increase the likelihood of either misrepresentation of or argument about severity simply in order to get access to the no-fault compensation.

With respect to (b), there are important equity issues - for example, that a pedestrian injured while crossing a public street should not be disadvantaged if hit by a bicycle rather than a motor vehicle. Whilst it is true that injuries caused by motor vehicles are likely to be more severe than those caused by a bicycle, this is by no means always the case. We note that it is also possible for the actions of a pedestrian (eg on a shared path) to result in severe injury to a cyclist.

In addition, if injuries caused by vehicles other than motor vehicles are excluded from the scope this potentially opens up a complex area of litigation where there is a chain of events that result in a bicycle (or other non-motor vehicle, such as a gopher) causing injury to a pedestrian - in which there might or  might not have been involvement of a motor vehicle (eg by causing a cyclist to swerve towards pedestrians.

With respect to (c), this would be a more limited version of the scheme that already exists in New Zealand. It avoids some of the problematic issues that arise from the New Zealand coverage of accidental injuries in private places (including, for example, workplaces) which would continue to be covered by existing private insurance arrangements such as workers compensation and public liability insurance.

Within the currently-proposed motor-vehicle injury insurance, the method of payment should reflect the exposure (as both cause and effect) to injury, the most obvious determinant of which is distance travelled. A second element is the size and mass of the vehicle. For both these factors, there is a high correlation with fuel consumption and, therefore, a logical (and economically-efficient) way of funding such a scheme would be through a levy on motor vehicle fuel - as is the case in New Zealand for the motor  vehicle component of its scheme.

Whilst, since the High Court decision of 1997 on business franchise fees (including petroleum franchise fees), it appears that the States have no power to impose charges or taxes on motor vehicle fuel, the States and Commonwealth can collectively do so by a differential rate of GST on fuel. Since the Productivity Commission has recommended that no-fault CTP insurance schemes should be introduced by all States and Territories, this is a clear opportunity for Western Australia to show leadership at the national level. GST on motor vehicle fuel is returned directly to the States, so any such proposal can be kept separate from the issues of redistribution of GST revenues that are so disadvantageous to Western Australia.

We would be happy to provide further information or to discuss the matters raised in this submission. Please contact me by phone or email should you wish to do so.

Written and Posted by Ian Ker, Convenor, STCWA on behalf of the STC Committee

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