In 1994, concerns regarding the cost of liability insurance coupled with growing perceptions that the law of joint and several liability was not being administered consistently, led the Commonwealth and NSW Attorneys General to commission an inquiry. The inquiry was conducted by Professor Jim Davis and one of its key recommendations was that the joint and several liability of defendants where negligence caused property damage or economic loss be replaced by liability which is proportionate to each defendants degree of fault.
On 15 March 2001, the HIH Insurance Group ("HIH") received approval from the NSW Supreme Court to be placed into provisional liquidation. Provisional liquidator, Tony McGrath of KPMG, was appointed over HIH and 17 of its controlled entities. Partly caused by under pricing risk and by offering low and uneconomic premiums, HIH collapsed owing around $5.3 billion to creditors.
The HIH collapse along with a combination of market forces, increasingly litigious societal attitudes, arguably over-sensational news reporting of a number of large personal injury compensation payouts and a number of court decisions that extended liability for negligence all helped to create a situation where significant upward pressure was placed on insurance premiums. A report from the Australian Treasury in 2015 noted that the collapse of HIH had extremely damaging consequences for Australian communities and confidence in the insurance industry as premium increases of over 1,000% were reported.
These increases hit public liability and professional indemnity insurance premiums particularly hard and led to some organisations and professional practitioners not being able to afford the insurances they were legislatively required to have. The collapse of HIH and the far reaching impact it had on the Australian community inevitably led to the HIH Royal Commission and subsequently, its recommendations, which paved the way for reform of prudential regulations and tort law.
Proportionate liability - why was it introduced?
In 2002 a meeting of state and territory ministers agreed to commission a report to review how the law of negligence was administered. The Chief Justice of Western Australia later explained that the Ipp report highlighted a number of problems with the law of negligence and primarily that:
- the application of the law of negligence in the courts was confusing and inconsistent;
- it had become too easy for plaintiffs in personal injury claims to find defendants liable for negligence; and
- the award of damages in personal injury cases were often too high and were generally unsustainable.
In 2003, the finance ministers of all Australian states and territories agreed to enact uniform legislation on proportionate liability. Unfortunately the enactment of uniform legislation was not achieved and individual legislation was later introduced by each Australian jurisdiction. In Western Australia the Civil Liability Act 2002 (WA) was enacted.
'Proportionate liability' - what does it mean?
In simple terms, proportionate liability allows courts to allocate liability for a wrong between defendants. More specifically, liability is apportioned to a defendant only in the amount that that particular wrongdoer contributed to the plaintiff's loss.
Proportionate liability - does it apply to personal injury compensation claims?
The Civil Liability Act 2002 (WA) specifically excludes the apportionment of liability in any claim arising from a personal injury. More specifically, the Act excludes the apportionment of liability to damages relating to the personal injuries contemplated by the Motor Vehicle (Third Party Insurance) Act 1943 (WA), the Workers’ Compensation and Injury Management Act 1981 (WA) and the Civil Aviation (Carriers’ Liability) Act 1961 (WA).
Notwithstanding this, if particular requirements are met, the Workers’ Compensation and Injury Management Act 1981 (WA) does allow a plaintiff to sue and claim common law damages. It is in these proceedings that proportionate liability is applied to ensure defendants are only required to pay a plaintiff damages to the extent that the defendant is liable for the loss in question. To be awarded common law damages a plaintiff must prove that the injury or illness sustained was due to the negligence of the employer and/or any negligent third parties.
Here, in regards to the assessment of common law damages, the Civil Liability Act 2002 (WA) provides specific detail on the calculation of personal injury damages for non-pecuniary loss or general damages and also for pecuniary loss. In this context non-pecuniary loss is defined as:
- pain and suffering;
- loss of amenities of life;
- loss of enjoyment of life;
- curtailment of expectation of life; and
- bodily or mental harm.
Pecuniary loss includes damages for the provision of home care services and loss of earnings. Specifically, loss of earnings is defined as:
- past economic loss due to loss of earning or the deprivation or impairment of earning capacity; or
- future economic loss due to loss of prospective earnings or the deprivation of impairment of prospective earning capacity.
Proportionate liability - does it apply to plaintiff claims?
Proportionate liability is not applied in plaintiff claims. The Civil Liability Act 2002 (WA) does, however, refer to the standard of contributory negligence which is defined as:
...the principles that are applicable in determining whether a person is liable for harm caused by the fault of the person also apply in determining whether the person who suffered harm has been contributorily negligent in failing to take precautions against the risk of that harm.
The argument of contributory negligence is used by defendants to reduce the percentage of liability being claimed against them. Contributory negligence is, however, only a partial defence and if the two sides cannot come to an agreement as to how liability will be shared, an apportionment of liability will be decided by the court.
How can we help?
Separovic Injury Lawyers will provide you with down to earth and clear advice on exactly how the legal concepts of proportionate liability and contributory negligence could influence the outcome of your workers' compensation, car accident or public liability compensation claim.
Personal injury legislation is complex and legal processes differ depending on the type of claim you are making. We advise injured claimants to seek legal advice as soon after their injury as possible.