Compensation payable

Overview

The determination or agreement of a worker’s degree of permanent impairment can have a greater significance beyond the payment of permanent impairment compensation under section 66 of the Workers Compensation Act 1987 (1987 Act).

This guidance considers:

• how the degree of permanent impairment is assessed
• permanent impairment or lump sum compensation and
• the use of degree of permanent impairment in determining access to benefits under the workers compensation acts and at common law.

Degree of permanent impairment

The determination or agreement of a worker’s degree of permanent impairment can be significant both for workers and the management of claims more generally.

The 2012 amendments impacted permanent impairment including by:

• establishing a link between a worker’s degree of permanent impairment and their entitlement to weekly payments and medical payments beyond defined timeframes
• removing the entitlement to lump sum compensation for pain and suffering (the former section 67 of the 1987 Act) for workers other than exempt workers
• introducing a threshold for compensation for claims for permanent impairment compensation (not including exempt workers). A worker who makes a claim for permanent impairment compensation on or after 19 June 2012 (subject to certain transitional provisions) must exceed 10 per cent whole person impairment (WPI) to receive permanent impairment compensation (psychological injuries continue to have a 15 per cent threshold for lump sum compensation).

A worker's degree of permanent impairment is used in two broad ways in workers compensation:

• to determine the amount of a worker’s entitlement to permanent impairment compensation monies (under section 66 of the 1987 Act), and
• as a gateway or threshold to other entitlements under the Act and at common law.

See Insurer guidance GN 1.2 Overview of changes and reforms for more details on the 2012 amendments.

Lump sums for permanent impairment

The workers compensation legislation states that a worker who receives an injury that results in permanent impairment greater than 10% is entitled to receive permanent impairment compensation (also referred to as non-economic loss or lump sum compensation) for that permanent impairment (section 66(1) of the 1987 Act).

The assessed percentage may equate to a monetary amount (subject to reaching certain thresholds) as specified in the Workers compensation benefits guide (Benefits guide). These amounts are indexed each year on 1 July. A worker is entitled to only one claim for permanent impairment compensation in respect of the permanent impairment that results from the injury (section 66(1A) of the 1987 Act). However, a worker who brought a claim for permanent impairment compensation before 19 June 2012 may be entitled to make one further claim - see Clause 11, Schedule 8 to the Workers Compensation Regulation 2016 (2016 Regulation).

A claim for permanent impairment compensation

Section 281 of the Workplace Injury Management and Workers Compensation Act 1998 (1998 Act) provides that a person on whom a claim for lump sum compensation (or work injury damages) is made must determine the claim within:

• one month after the degree of permanent impairment first becomes fully ascertainable, as agreed by the parties or as determined by a medical assessor, or
• within two months after the claimant has provided to the insurer all relevant particulars about the claim, whichever is the later (but subject to the following).

If the insurer considers that any particulars about the claim are insufficient, the insurer should, within two weeks of the date of the claim, request further relevant particulars (see section 282(3) of the 1998 Act). If the further particulars are not requested within two weeks, the insurer cannot delay determining the claim on the ground that relevant particulars have not been provided.

If the insurer requires the worker to submit him/herself to an independent medical examination, the worker is not considered to have provided all relevant particulars until the worker has attended that medical examination (see section 282(2) of the 1998 Act). The practical effect of this is that if an insurer makes an appointment for an independent medical examination and advises the worker of the appointment within two weeks of the date of the claim, then the two months allowed to determine the claim (under section 281(2) of the 1998 Act) is extended to two months after the worker attends the medical examination.

The insurer should have all the relevant particulars (see section 282 of the 1998 Act for what constitutes all relevant particulars) about a claim to enable the insurer to make a proper assessment of the worker’s full entitlement on the claim.

Part 8 of the Workers compensation guidelines states that a claim for lump sum compensation must be accompanied by a report from a permanent impairment assessor listed on the SIRA website, as trained in the assessment of the part or body system being assessed. The report must include:

• a statement that the condition has reached maximum medical improvement
• an assessment on the part or system of the body being assessed including the percentage of permanent impairment in line with the NSW workers compensation guidelines for the evaluation of permanent impairment in effect at the time of the examination
• if the claim relates to hearing loss, a copy of the audiogram used for the medical report.

A claim is determined by either accepting liability and making a reasonable offer of settlement or disputing liability (see Insurer guidance GN 8.1 Insurer decisions and decision notice requirements for more information on dispute notices and the requirements of section 78 of the 1998 Act).

As a gateway or threshold to other entitlements

In addition to lump sum compensation, a worker’s degree of permanent impairment determines whether the worker can:

• access ongoing weekly or medical benefits
• claim damages
• access a commutation
• access domestic assistance.

The table below provides an overview of worker entitlements as they correspond to the worker’s degree of permanent impairment.

How degree of permanent impairment is assessed

The entitlement to lump sum compensation first commenced under the Workers Compensation Act 1926 (1926 Act) and has been subject to two fundamental changes, the first in 1987 and the second in 2001. Which of the three separate permanent impairment models applies to a worker’s claim is usually determined by whichever model was in existence at the time of the injury (not at the time the claim was made).

The assessment under each method differs. There are also different entitlements attached to each assessment. Entitlement to compensation under each of the methods depends on whether the permanent loss or impairment was compensable at the time of the injury. Details of benefits payable are provided in the Workers compensation benefits guide.

The different assessment methods

Assessment for injuries received before 30 June 1987 (under the 1926 Act)

Assessment under the 1926 Act used the Table of Maims, which applies to injuries received before 4:00 pm on 30 June 1987 (except for hearing loss). The Table of Maims contains a limited list of body parts and each loss expressed in the Table has a corresponding maximum amount payable.

Losses under the 1926 Act were largely subjective assessments by medical experts as that Act provided limited guidance to ensure consistency between assessments. Insurers could now expect to see very few injuries under the Table of Maims.

Assessment of injuries received from 30 June 1987 to 31 December 2001

Injury assessment is outlined in section 66 and the Table of Disabilities. The Table of Disabilities provided a more comprehensive list of permanent injuries that could be compensated and increased the amount of compensation that was payable.

Examples of impairments and losses not previously compensated under the 1926 Act include loss of bowel function and severe facial disfigurement. Later amendments extended the Table of Disabilities to include HIV infection and AIDS, amongst others.

The amendments under the 1987 Act introduced an additional amount for pain and suffering (the now former section 67 compensation). Entitlement to pain and suffering compensation was restricted to losses and impairments that totalled at least 10 per cent of the maximum amount payable under section 66 of the 1987 Act. The entitlement to compensation for pain and suffering was removed for most workers in the 2012 amendments.

The method of assessment under the Table of Disabilities remained essentially the same as under the Table of Maims. The assessments were undertaken by accredited doctors. The perception that these assessments were subjective and not necessarily grounded by objectively referenced criteria for examination and reporting led, in part, to changes to how permanent impairment is assessed, effective for injuries from 01 January 2002 (see below). The Table of Disabilities was also considered by some in the medical profession to be a “blunt” instrument to assess a worker’s permanent impairment especially for more complex and emerging injuries.

The calculation of compensation changed under the Table of Disabilities. The total payable for each loss and impairment was expressed as a percentage of an overall maximum amount. The overall total amount applied to all losses and impairments.

Assessment of injuries received from 1 January 2002

The 1987 Act underwent significant changes in 2001 including changes relating to lump sum compensation and, importantly, the method of assessment of impairment.

For injuries sustained on or after 1 January 2002, the assessment of permanent impairment is by application of the American Medical Association’s Guides to the Evaluation of Permanent Impairment Fifth Edition (AMA5) (as modified by the NSW Workers compensation guidelines for the evaluation of permanent impairment (the Permanent impairment guidelines). The current edition is the fourth, issued on 1 April 2016.

The Permanent impairment guidelines are used by trained medical assessors to ensure an objective, fair and consistent method of evaluating the degree of permanent impairment.

Note: the 2001 amendments do not apply to coal miners and assessments of impairment for coal miners continue to be made under the Table of Disabilities.

Assessment using the NSW workers compensation guidelines for the evaluation of permanent impairment

Medical assessors

An assessor must be a registered medical practitioner recognised as a specialist in their field. They must have qualifications, training and experience relevant to the body system being assessed.

Assessors have successfully completed requisite training in using the Permanent impairment guidelines for each body system they intend to assess. They are listed as a trained assessor of permanent impairment for each relevant body system(s) on the SIRA website.

Disputes over the assessed degree of permanent impairment

Where there is a discrepancy or inconsistency between medical reports that cannot be resolved between the parties, the Personal Injury Commission (the Commission) has the jurisdiction to determine disputes about the assessed degree of permanent impairment. The Commission has a series of short videos that explain the role of the Commission including what a worker can expect when they attend the Commission and what to expect in the medical assessment process.

Some principles of assessment

Maximum medical improvement

Assessments are only to be conducted when the medical assessor is satisfied that the impairment is permanent and that the degree of permanent impairment is fully ascertainable (see section 322(4) of the 1998 Act). This is considered to occur when the worker’s condition is well-stabilised and is unlikely to change substantially in the next year with or without medical treatment  - see definition of maximum medical improvement in the Permanent impairment guidelines.

Multiple impairments

Impairments arising from the same injury are to be assessed together. Impairments resulting from more than one injury arising out of the same incident are also to be assessed together to calculate the degree of permanent impairment of the claimant for the purposes of Division 4 of the 1987 Act - see section 65 of the 1987 Act.

The exception to this rule is in the case of psychiatric or psychological injuries. Where applicable, impairments arising from primary psychological and psychiatric injuries are to be assessed separately from the degree of impairment that results from any physical injuries arising out of the same incident. The results of the two assessments cannot be combined (section 65A of the 1987 Act).

In the case of a complex injury, where different medical assessors are required to assess different body systems, a ‘lead assessor’ will be nominated to coordinate and calculate the final degree of permanent impairment as a percentage of WPI resulting from the individual assessments.

Psychiatric and psychological injuries

A primary psychiatric or psychological condition is distinguished from a secondary psychiatric or psychological condition, which arises as a consequence of, or secondary to, another work-related condition. For example, depression associated with a back injury is considered to be a secondary psychological injury. When assessing the degree of permanent impairment that results from a physical injury or primary psychological injury, no regard is to be had to any impairment or symptoms resulting from a secondary psychological injury (see section 65A(2) of the 1987 Act).

No permanent impairment compensation is payable in respect of permanent impairment that results from a secondary psychiatric or psychological injury (section 65A(1) of the 1987 Act). As discussed above, impairments arising from primary psychological and psychiatric injuries are to be assessed separately from the degree of impairment that results from physical injuries arising out of the same incident. The results of the two assessments cannot be combined.

No permanent impairment compensation is payable in respect of permanent impairment that results from a primary psychological injury unless the degree of permanent impairment is at least 15 per cent (section 65A(3) of the 1987 Act).

If a worker receives a primary psychological injury and a physical injury, arising out of the same incident, the worker is only entitled to receive compensation for impairment resulting from one of those injuries (section 65A(4) of the 1987 Act), as follows:

• the degree of permanent impairment that results from the primary psychological injury is to be assessed separately from the degree of permanent impairment that results from the physical injury (despite section 65(2) of the 1987 Act)
• the worker is entitled to receive compensation for impairment resulting from whichever injury results in the greater amount of compensation being payable to the worker (and is not entitled to receive compensation under this Division for impairment resulting from the other injury)
• the question of which injury results in the greater amount of compensation is, in default of agreement between the parties, to be determined by the Commission.

Deductions for previous injuries or pre-existing conditions

The Permanent impairment guidelines state that the degree of permanent impairment resulting from pre-existing impairments should not be included in the final calculation of permanent impairment if those impairments are not related to the compensable injury.

In assessing the degree of permanent impairment resulting from the compensable injury/condition, the assessor is to indicate the degree of impairment due to any previous injury, pre-existing condition or abnormality. This proportion is known as ‘the deductible proportion’ and should be deducted from the degree of permanent impairment determined by the assessor. For the injury being assessed, the deduction is one-tenth of the assessed impairment, unless that is at odds with the available evidence (section 323 of the 1998 Act).

Aggregation of permanent impairments

As noted above, if a worker receives more than one injury arising out of the same incident, those injuries are to be treated together as the one injury for the purpose of assessing the degree of permanent impairment, except for primary psychological injuries. See Department of Juvenile Justice v Edmed [2008] NSWWCCPD 6), section 322(3) of the 1998 Act and section 65(2) of the 1987 Act.

If a physical injury and a primary psychological injury arise out of the same incident, the degree of permanent impairment for each injury cannot be aggregated. The worker is entitled to lump sum compensation for the highest assessment (see section 65A(4) of the 1987 Act).

Impairments arising from multiple unrelated injuries, that is, injuries that have caused different pathology, cannot be aggregated to reach the required threshold to trigger additional entitlements under the legislation (see Merchant v Shoalhaven City Council [2015] NSWWCCPD 13).

Impairments that result from the ‘same injury’ (pathology) are to be assessed together even if they have resulted from different incidents, however, the pathology (injury) resulting from each incident must be identical (see Trustees of the Roman Catholic Church for the Diocese of Parramatta v Barnes [2015] NSWWCCPD 35 and section 322(2) of the 1998 Act).

Sections 15 and 16 single impairment

Section 68B(2) of the 1987 Act addresses claims impacted by sections 15 and 16 of the 1987 Act. The date of injury for a disease injury is a deemed date to essentially attach liability to the employer who last employed the worker in employment to the nature of which the disease (section 15 of the 1987 Act) or the aggravation, acceleration, exacerbation or deterioration of any disease (section 16 of the 1987 Act) was due (see Insurer guidance GN 2.2 Injury for more information).

Section 68B(2) provides that if a worker’s disease or aggravation of a disease was caused or contributed to by employment with a number of employers, the permanent impairment resulting from employment with all those employers is treated as a single impairment for calculating the degree of permanent impairment and deductions can only be made in very specific, limited circumstances.

For example, if a nurse worked in a number of employments, as a nurse, all of which aggravated degenerative spinal disease, the permanent impairment entitlement would not be reduced for the effect of the earlier (aggravating) employments as a nurse.

Section 66A complying agreements

An agreement between a worker and an insurer in relation to payment of section 66 permanent impairment compensation must be in writing and contain the information set out in Part 8 of the Workers compensation guidelines.

The agreement will not be valid unless the worker has received independent legal advice about the agreement before they entered into it or waived the right to obtain independent legal advice (section 66A of the 1987 Act). See further discussion below on negotiation of degree of permanent impairment.

Other considerations

Objective review of permanent impairment assessment reports

Insurer staff are not trained assessors of permanent impairment. However, they can play a role in objectively reviewing permanent impairment assessment reports. This role requires a particular skill set and, most importantly, experience in reviewing assessments. Insurers should give careful consideration to the ongoing training needs of their staff in order to build and maintain this capability.

Things to consider

The Permanent impairment guidelines adopt the AMA5 in most cases. Where there is any deviation, the procedures detailed in the Permanent impairment guidelines prevail. Compared to an insurer-initiated assessment, reviewing a report of assessment initiated by a worker may require consideration of additional factors including:

• does the impairment assessed result from the accepted work-related injury, that is, are the body part/systems part of the accepted work injury/condition? Consequential injuries are a feature of workers compensation permanent impairment claims and warrant careful consideration by insurers
• whether the impairment is permanent
• is the assessor listed on the SIRA website as a trained assessor of permanent impairment for each relevant body system(s)?
• does the history obtained and relied upon support with the available evidence?
• have the assessor’s clinical examination findings been identified?
• have the reports or investigations relied upon been identified?
• does the diagnosis of the condition, arising from the work injury/illness, accord with the available evidence?
• has an opinion been provided as to whether or not the injury/illness has reached maximum medical improvement? has the basis for that opinion been provided?
• has the assessor correctly used the tables, graphs and methodology used in the Permanent impairment guidelines and the applicable legislation?
• has the assessor identified the proportion of WPI due to previous injury, pre-existing condition or abnormality, if any?
• does the report include a conclusion from the assessor including the final percentage of WPI?

Further clarification

Where an insurer identifies a report may not be in accordance with the Permanent impairment guidelines, they can request written clarification from the assessor.

Permanent impairment disputes

Where there is a discrepancy or inconsistency that cannot be resolved between the parties, the Commission has the jurisdiction to determine disputes about the assessed degree of permanent impairment. The Commission has a series of informative videos that describe the Commission's role and what to expect in the medical assessment process.

Negotiation on the degree of permanent impairment

Where appropriate, parties may negotiate and reach agreement on the worker's degree of permanent impairment. There is nothing in the workers compensation Acts that expressly precludes the parties reaching an agreement as to the degree of permanent impairment. The scheme as a whole promotes the settlement of disputes without litigation. Reaching an agreement on the degree of permanent impairment enables insurers to make prompt payment of entitlements and reduces administrative and legal costs across the workers compensation system.

Noting the significance of a worker's degree of permanent impairment for entitlements under the Acts and at common law, it is important that insurers enter into negotiations in good faith and engage in conduct that is fair and transparent. Informed negotiation requires insurers to proactively share copies of all relevant reports and other evidence with workers prior to the commencement of negotiations. Where the insurer and worker agree on the degree of permanent impairment, insurers must enter into a written agreement (complying agreement) that satisfies section 66A of the 1987 Act and the Workers compensation guidelines. A copy of the signed complying agreement should be kept on file.

As highlighted in the decision of Warwar v Speedy Courier (Australia) Pty Ltd [2010] NSWWCCPD 92, a complying agreement is a written agreement that is to be interpreted by reference to the surrounding circumstances known to the parties, and the purpose and object of the transaction. It is important that insurers are unambiguous, transparent, fair and open in all their dealings with workers in respect of complying agreements.

In Part 7, Chapter 7 of the 1998 Act, the provisions regarding referrals for assessment relate to the referral of disputes for assessment – if there is no dispute there is no power to refer a matter for assessment.

Legal advice for the worker

A complying agreement will not be valid unless the worker has received independent legal advice (or waived the right to do so) before entering into the agreement (section 66A of the 1987 Act).

Noting the significance of an agreement on the worker’s degree of permanent impairment, insurers should strongly encourage the worker to contact the Independent Review Office (IRO) in order to access independent legal advice.

Long-standing claims

It is not unusual for older claims (particularly those that pre-date the 2012 amendments) to have multiple complying agreements. There may be separate complying agreements for both section 66 (permanent impairment compensation) and the now-repealed section 67 of the 1987 Act (pain and suffering).

Insurers should exercise due care and diligence when negotiating the degree of permanent impairment on all claims, especially long-standing claims.