Common law and recoveries

Overview

If a worker is injured in circumstances where the employer was negligent, the worker may have a right to claim work injury damages. ‘Damages’, in relation to work injuries, are compensatory in that they attempt to measure, in monetary terms, the harm caused to a worker by the negligence of their employer.

A claim for work injury damages is sometimes referred to as a ‘modified’ common law claim. That is, the claim is limited to damages for past economic loss due to loss of earnings and future economic loss due to the loss or impairment of earning capacity as a result of the work injury only. The general common law damages regime has been ‘modified’ by the Acts.

Part 5 of the Workers Compensation Act 1987 (1987 Act) sets out the common law remedies available to a worker.

Chapter 7, Part 3, Division 4 and Chapter 7, Part 6 of the Workplace Injury Management and Workers Compensation Act 1998 (1998 Act) deal with claims for damages.

This Insurer guidance looks at eligibility, the calculation of damages and procedural requirements.

Eligibility

A worker may have a right to claim work injury damages where:

• their injury has resulted from the employer’s negligence or other tort, and
• their injury has resulted in a degree of permanent impairment of at least 15 per cent (or the worker has died).

Negligence

An employer has a duty to employees to provide a safe work environment, referred to as an employer’s ‘duty of care’ to employees. Where there has been a breach of the duty of care, workers may be entitled to claim damages.

For a worker to establish that they suffered an injury as a result of their employer’s negligence, they must prove that:

• there was a foreseeable risk of injury
• the employer did not take reasonable steps or implement practices to minimise the risk of injury, and
• the employer’s negligence caused the worker’s injury and loss.

The question to be considered is whether a reasonable person in the employer’s position would have foreseen that their conduct involved a risk of injury to the worker.

Permanent impairment threshold

The degree of permanent impairment must be assessed in accordance with Part 7 of Chapter 7 of the 1998 Act and the NSW workers compensation guidelines for the evaluation of permanent impairment.

Section 280A of the 1998 Act provides that a claim for work injury damages cannot be made unless a claim for permanent impairment compensation (under section 66 of the 1987 Act) is made before or at the same time as the claim for damages.

Section 280B requires any permanent impairment compensation to be paid to the worker before a claim for work injury damages can be finalised.

If the employer/insurer accepts a degree of permanent impairment for a section 66 claim, that also constitutes acceptance of the degree of permanent impairment  for the purposes of a work injury damages claim (section 314(3) of the 1998 Act). This means that if an insurer accepts a section 66 claim for 15 per cent permanent impairment or more, the insurer cannot later raise a threshold dispute (under section 151H of the 1987 Act) if the worker brings a claim for work injury damages.

It is important case managers recognise the significance of the assessment of degree of permanent impairment in early claims management.

Time limit for commencement of court proceedings

A worker is not entitled to commence court proceedings for damages against the employer more than three years after the date of the injury, except with the leave of the court (section 151D of the 1987 Act).

Time will be ‘stayed’ during certain Personal Injury Commission (Commission) proceedings (section 151DA of the 1987 Act), including:

• a medical dispute as to the degree of permanent impairment, or
• a medical dispute as to whether the degree of permanent impairment is fully ascertainable.

In practice, the courts will consider each application for leave on its facts, having particular regard to whether the worker has an adequate explanation for the delay and whether permitting proceedings to be commenced late will cause the employer forensic prejudice of a type that cannot be overcome.

Economic loss only

Damages for work injuries comprise a single sum, calculated by assessment of past and future economic loss only (section 151G of the 1987 Act), with some limitations imposed:

• when calculating damages, no regard can be had to any earnings that exceed the maximum amount of weekly compensation under section 34 of the 1987 Act (section 151I)
• damages for future economic loss is calculated to pension age only (section 151IA)
• damages for future economic loss to be qualified by adopting the prescribed discount rate of 5 per cent (section 151J)
• Fox v Wood claims: Where a worker has received weekly payments of compensation, an allowance is made for income tax deductions from the previously paid weekly compensation (Fox v Wood [1981] HCA 41)
• Loss of superannuation benefits: An allowance is made for loss of both past and future superannuation benefits.

Damages for pain and suffering, domestic assistance, medical treatment and expenses are not included in the calculation of damages.

As the amount of damages is calculated by assessing loss of earnings, the amount of weekly compensation benefits already paid must be deducted from the damages amount (section 151A(1)(b) of the 1987 Act).

In practice, the insurer needs to provide an up-to-date list of payments so that accurate calculations can be made on the date the matter resolves (most commonly at mediation in the Commission – see discussion below).

The amount of damages may be reduced if it is established that:

• a worker’s negligence contributed to the injury (section 151N of the 1987 Act)
• a worker was negligent in failing to take sufficient care for his/her own safety (section 151O of the 1987 Act), or
• a worker failed to mitigate the damage (section 151L of the 1987 Act).

Note: coal miner damages are calculated differently.

Impact on other entitlements

If a worker recovers damages, he/she ceases to be entitled to ongoing workers compensation benefits, including, importantly, the payment of ongoing medical treatment expenses (section 151A(1)(a) of the 1987 Act).

If a worker recovers damages, there will likely be a preclusion period applied by Centrelink. This means the worker will be unable to claim Centrelink benefits for an extended period of time. This is a matter for the worker to discuss with their legal provider and Centrelink.

If a work injury damages claim is unsuccessful, the worker will continue to receive statutory workers compensation benefits (subject to satisfying the requirements of the Acts).

Procedural requirements

Notice of work injury damages claim and the insurer’s response

Generally, a worker’s legal representative will submit the 'relevant particulars about a claim' to enable the insurer, as far as practicable, to make a proper assessment of the claim.

Section 282 of the 1998 Act states the relevant particulars are full details of the following:

• the injury received by the claimant
• all impairments arising from the injury
• any previous injury, or any pre-existing condition or abnormality, to which any proportion of an impairment is or may be due (whether or not it is an injury for which compensation has been paid or is payable under Division 4 of Part 3 of the 1987 Act)
• details of the economic losses that are being claimed as damages and details of the alleged negligence or other tort of the employer
• information relevant to a determination as to whether or not the degree of permanent impairment resulting from the injury will change
• such other matters as the Workers compensation guidelines may otherwise provide.

Part 8.1 of the Workers compensation guidelines sets out further relevant particulars that must be provided.

Determining liability

An insurer cannot delay determining a claim because of a lack of particulars unless the insurer has requested further relevant particulars within two weeks of being provided with the particulars (section 282(4) of the 1998 Act).

Examples of ‘further and better particulars’ might include details about the allegations of negligence or other injuries. If, within two weeks of receiving the notice of claim, the insurer advises the worker that a medical assessment is required, then the claimant is not considered to have provided all relevant particulars.

In these cases, the two-month timeframe for determining the claim begins on the date the worker supplies the missing information or attends the examination (‘time will not commence to run’).

Section 281 of the 1998 Act provides that within one month of the degree of permanent impairment becoming fully ascertainable (as agreed by the parties or as determined by an Approved Medical Specialist (AMS)), or within two months after all the relevant particulars of the claims for work injury damages have been provided to the insurer (whichever is the later), the insurer must:

• accept liability and make a reasonable offer of settlement, or
• dispute liability.

The insurer must indicate whether it accepts that the degree of permanent impairment is enough to qualify for work injury damages (that is, at least 15 per cent).

Dispute notices in a work injury damages matter

If an insurer disputes liability for the claim, a dispute notice must be issued in accordance with section 78 of the 1998 Act. A notice to dispute liability in a work injury damages matter must contain a statement:

• that the claimant must serve a pre-filing statement on the defendant (in accordance with section 315 of the 1998 Act) and refer the claim to the Commission for mediation (in accordance with section 318A of the 1998 Act) before a claimant can commence court proceedings
• that the claimant cannot raise matters in court proceedings that are materially different from those contained in the pre-filing statement, except with leave of the court (section 318 of the 1998 Act)
• identifying all the reports and documents submitted by the worker; that the worker can seek advice from their trade union, a legal practitioner or any relevant service established by SIRA, and the details of the Commission (clause 38A of the Workers Compensation Regulation 2016).

Making an offer of settlement

If the insurer accepts liability, it must make an offer of settlement that sets out the amount of damages or a way to determine this amount. Where it only accepts partial liability, the offer must include enough details to show how much is accepted (section 281 of the 1998 Act).

Pre-filing statement and defence

Before a worker can start mediation or court proceedings to recover work injury damages, the worker must serve a pre-filing statement on the employer and the insurer.

The worker can only do this if the insurer:

• wholly disputes liability for the claim, or
• has made an offer of settlement and one month has elapsed since the offer was made without a response or the claimant has rejected the offer, or
• has not determined the claim as and when required by section 281 of the 1998 Act.

A worker is not able to serve a pre-filing statement until the 15 per cent permanent impairment threshold has been satisfied (section 313 of the 1998 Act).

The Personal Injury Commission Rules 2021 deals with work injury damages and sets out the material that must be served with the pre-filing statement and the pre-filing defence. Rule 86 provides that the pre-filing statement is to include a copy of the statement of claim intended to be filed in the court of relevant jurisdiction, and attach the information and documents relied upon.

If the insurer believes the pre-filing statement is in some way defective, the insurer has seven days to notify the claimant of the defect, giving details of any alleged defect (section 317 of the 1998 Act). A dispute about a defective pre-filing statement may be referred to the Registrar for determination (section 317 of the 1998 Act and rule 84).

Pre-filing defence

The insurer must respond to the pre-filing statement within 28 days of receiving it by:

• accepting or denying liability (wholly or partly), and
• to the extent that the defendant does not accept liability, serving a pre-filing defence which sets out the particulars of the defence and all the information and documents that the defendant will rely on (section 316 of the 1998 Act and rule 86).

Application to strike out a pre-filing statement

A defendant may apply to the President of the Commission to have a pre-filing statement struck-out (section 151DA(3) of the 1987 Act). At least six months must have elapsed since the defendant served the claimant worker with a pre-filing defence before an application can be made under section 151DA(3) of the 1987 Act.

The claimant is to lodge an notice of Opposition to Application to Strike Out a Pre-filing Statement as directed by the Registrar.

The President must not order that the pre-filing statement be struck out where the degree of permanent impairment is not yet fully ascertainable and the matter has been referred for assessment under Part 7 Chapter 7 of the Act (section 151DA(4) of the 1987 Act).

Compulsory mediation in work injury damages matters

In most cases, before starting court proceedings, the worker must refer a claim to the Personal Injury Commission (the Commission) for mediation.

The worker must wait at least 28 days after issuing the pre-filing statement before referring the claim to the Commission for mediation.

The parties must attend mediation, unless the defendant wholly denies liability for the claim. The respondent insurer or employer is expected to attend the mediation personally and have authority to negotiate and settle.

Applications for mediation are lodged with the Registrar of the Commission (rule 87). Defendants served with application for claim mediation, must, within 21 days of registration, lodge a response (rule 88).

The Commission has produced an informational video covering the mediation process.

Role of the mediator

Mediators are appointed by the Commission. The mediator will contact the parties to arrange a suitable date and time, within five weeks of the date of the referral, for the mediation. The Commission is committed to servicing rural and regional communities and mediations can be held across NSW (currently 20 different venues).

The mediator may require further information to be filed and exchanged between the parties and may issue a summons requiring attendance at a conference (section 318D of the 1998 Act).

Mediation is defined by the Commission as a fair, unbiased and informal process in which parties, with the assistance of a mediator, have the opportunity to identify the issues in dispute, develop options, consider alternatives, and endeavor to reach an agreed outcome that permanently resolves a claim for workplace injury damages.

Mediators do not have a role in determining the outcome of the claim or advising either party about the strengths/weaknesses of the parties’ respective positions. Parties will be requested to agree that the mediation is confidential and privileged.

The mediator must use his/her best endeavors to bring the parties to an agreement on the claim. A Certificate of Mediation Outcome is issued only where the parties fail to reach agreement. In that instance, the certificate will certify the final offers made by the parties in mediation (section 318B of the 1998 Act) – see discussion about legal costs below. The parties may then proceed to Court. In practice, the parties often continue to negotiate after the mediation particularly if the final offers were close.

Deed of release

If a matter settles at mediation, the parties will usually enter into a Deed of Release (the Deed) at the mediation or soon after. The precise content of the Deed is a matter between the parties. Deeds in work injury damages matters commonly exclude latent diseases (eg dust diseases and deafness).

It is important that the Deed clearly identifies what injury or injuries the damages are paid in respect of.

Insurers are required to continue to pay weekly payments (if the worker is otherwise entitled to them) up to the date the damages monies are released to the worker’s solicitor. Entitlement to medicals generally ceases on the date the Deed is signed.

It is good practice for insurers to make sure all outstanding reimbursements, travel, requests for treatment, etc are dealt with before the mediation so that these do not become a barrier to settling matters.

Insurers should be diligent in obtaining any necessary Centrelink and Medicare clearances.

Legal costs

Despite the requirement that final offers appear in the Certificate of Mediation Outcome, any offer of settlement made by a party in the course of mediation must not be specified in any pleading, affidavit or other document filed on or in connection with court proceedings on the claim (section 318E of the 1998 Act). Further, those offers cannot be disclosed or taken into account by the Court before the Court's determination of the amount of damages in the proceedings.

A party cannot recover and a court cannot award costs other than in accordance with the Workers Compensation Regulation 2016 (2016 Regulation) (section 346 of the 1998 Act). When a work injury damages matter eventually resolves by way of judgment in the court, the following applies:

• if the claimant obtains an order or judgment no less favourable than his or her final offer made at mediation (as certified by the mediator), the court is to order the insurer to pay his/her costs on a party/party basis (clause 94 of the 2016 Regulation)
• if the claimant obtains an order or judgment that is less favourable than his or her final offer made at mediation (as certified by the mediator), the court is to order the claimant to pay the insurer’s costs on a party/party basis (clause 95 of the 2016 Regulation)
• if a claimant does not obtain an order or judgment on a claim (that is, if the court finds the insurer has no liability for the claim), the court is to order the claimant to pay the insurer’s costs on a party/party basis (clause 95 of the 2016 Regulation).

Where the insurer denies liability and no mediation occurs, and the claimant later obtains a judgment in their favour for damages, costs are to be awarded as if the insurer has made a final offer of settlement at mediation of $0 and the claimant made a final offer of damages specified in the pre-filing statement (see clause 97 of the 2016 Regulation).

Costs in work injury damages claims are calculated in accordance with Schedule 7 of 2016 Regulation. However, clause 93 allows for contracting out of Schedule 7 if a law practice enters into a costs agreement and makes the required disclosures.

Contracting out is common in work injury damages matters and most mediations in the Commission will proceed on an ‘inclusive/clear’ basis, that is, inclusive of the worker’s legal costs and clear of weekly payments made to date.

Other considerations for insurers

Work health and safety prosecutions and civil liability

A breach of the Work Health and Safety Act 2011 (WHS Act) does not give rise to a cause of action in civil proceedings (section 267 of the WHS Act).

Section 245A(1) of the 1998 Act states an admission of liability by an employer in work injury damages proceedings cannot be relied on in any proceedings against the employer for an offence under the work health and safety legislation.

Section 245A(2) of the 1998 Act, in contrast, states an admission of guilt by an employer in proceedings against the employer for an offence against the work health and safety legislation may be relied upon in a work injury damages matter.

Election provisions – revoking an election (the previous section 151A provisions)

The current section 151A of the 1987 Act provides that if a worker recovers damages from the employer, then the worker ceases to be entitled to any further compensation under the Act (see ‘Impact on other entitlements’ above).

However, the previous section 151A required a worker to make an election between alternate claims he/she might pursue in respect of a work-related injury. The Act was substantially amended in 2001.

The transitional provisions had the effect that, if a person had elected to claim permanent loss compensation under section 151A (the previous section 151A) before the start of the 2001 amendments, the amendment to section 151A would be inapplicable.

Under the previous provisions, a worker had to elect to take permanent loss compensation or damages. The election is irrevocable unless with leave of the court. The court may revoke the election if:

• after the election is made, the injury causes a further material deterioration in the person’s medical condition, that, had it existed at the time of the election, would have entitled the person to additional permanent loss compensation, and
• at the time of the election, there was no reasonable cause to believe that the further deterioration would occur.

If the court revokes the election, the provisions which govern the worker’s claim for damages are those in force in the Act at the time of the election (full common law damages - not the work injury damages regime). This can provide an incentive for a worker to seek revocation of the election and these matters do continue to arise from time to time. This scenario was recently considered by the NSW District Court in Glogoski v Workers Compensation Nominal Insurer [2019] NSWDC 154.

Other common law claims

The mandatory provisions in an employer’s insurance policy are contained in Schedule 3 of the 2016 Regulation. The insurer indemnifies the employer against:

• compensation that the employer becomes liable to pay under the Act or for any person who is a worker of the employer (clause 3(a) of Schedule 3 of the 2016 Regulation - statutory compensation)
• any other amount that the employer becomes liable to pay independently of the Act for an injury to any such person (clause 3(b) of Schedule 3 of the 2016 Regulation - damages)
• costs and expenses associated with the defence of any legal proceedings in which any of the above liabilities is alleged (clause 3(c) of Schedule 3 of the 2016 Regulation).

As such, the policy responds to common law claims. As noted above, most common law claims are work injury damages claims (modified common law claims). However, there are other common law claims that arise. For example, claims brought under the Compensation to Relatives Act 1897 by the family of a deceased worker. Damages in these claims are not limited to past and future economic loss, and the statutory lump sum death benefit (section 25 of the 1987 Act benefit) must be repaid.

The workers compensation policy also responds to common law dust disease claims. A worker who recovers damages in a dust disease matters has his/her damages calculated according to general common law principles. That is, the damages available are not the modified damages available to workers under the Workers Compensation Acts (where damages are limited to past and future economic loss only). Proceedings are brought in the Dust Diseases Tribunal, a court of record with exclusive jurisdiction to hear and determine matters for damages in respect of a dust-related condition or death.