Frequently Asked Questions on cuts to common law rights or 'tort
reform'
*Please note: This information is not intended
as legal advice and should not be treated as such. It is general
information only. Be sure to speak to a lawyer if you need advice
about a specific case.
Q. What is 'tort law'?
A. The word 'tort' comes from the French, meaning 'wrong'
or 'injury.' 'Tort law' is the body of law governing situations
when somebody wrongs or injures another person.
Q. Why does 'tort law' exist?
A. 'Tort law' exists to provide a person who is wronged
or injured by somebody else with rights that ensure the person
who inflicted the damage to that person or their property is responsible
for returning things to the way they were.
Q. What is the relationship between 'tort law' and compensation?
A. Returning a person to the state they were in before
they were wronged or injured can be extremely complex. Some things
are impossible to repair or to return to a person. In these cases
the court awards money to compensate for the damage that cannot
be repaired. For example, an injury may be permanent or have permanent
effects. The injury may cost a person months of pain or disability.
It may adversely affect their relationships. A person's outlook
or state of mind may be changed permanently. How can things such
as these be returned to their former state? In short, often they
can't. Instead, the court awards money to compensate for the damage
that cannot otherwise be 'fixed' or taken back. It also awards
money for financial loss that can be quantified, such as expenses
and loss of income.
Q. What precisely is 'tort law reform'?
A. 'Tort law reform' is the name that has been given
by its supporters to the process of removing the laws that require
people and organisations to fix the wrongs or injuries they inflict
on another person. The use of the word 'reform' suggests that
the system might work better if some changes are made. In fact,
'reformers' advocate for rights to be removed almost entirely.
This means that businesses and individuals will no longer be responsible
for repairing the damage and injury their negligence causes to
members of the public.
Q. What are the arguments for removing people's rights
to compensation?
A. The following puts forward some of the common arguments
for removing rights, followed by the relevant counter-arguments.
1. The courts are awarding large damages awards to people
whose injuries aren't serious enough to be deserving of compensation.
Damages awards are based upon compensating only for what a person
can prove they have lost. Insurers' lawyers fight for every dollar.
They will fight to prove that the damage was not their client's
fault, and they will fight to prove the damage is not as severe
as the injured person claims. Courts will not award compensation
unless both the fault and the damage can be proven. This is no
easy task. It is far more common for a seriously injured person
to receive much less compensation than they need to recover than
more.
2. Our society has adopted a 'culture of blame' that says
any incident must be someone else's fault, and somebody must pay
for it. This has resulted in a 'litigation explosion,' where people
sue each other over the most insignificant issues. The law was
not expected to apply to the kinds of claims being brought, and
is therefore vulnerable to being taken advantage of by unscrupulous
opportunists.
The ideas of a growing "culture of blame" or a "more litigious
society" are not supported by court statistics. Australian court
statistics show no evidence of a "litigation explosion," although
there is evidence that Sydney did have rates of litigation higher
than the rest of the country. Studies in the UK have found that
the "culture of blame" is a myth encouraged by the insurance industry
and recycled constantly by the media. The idea of a "more litigious
society" can be equated to the popular understanding that crime
is constantly rising. People continue to believe in it even though
statistics have indicated the opposite trend for an extended period.
3. High amounts of claims clog the legal system, preventing
genuine cases from being heard in a timely fashion and delaying
payment of their settlements.
The idea of frivolous or bogus claims clogging the legal system
is highly dubious. The vast majority of claims never get to a
courtroom. They are settled by their lawyers before they reach
court. In fact, it is in the interests of the insurance companies
to delay paying claims as long as possible. The longer they can
delay payment, the more interest they earn on the premium they
have collected. It is not 'clogged courts' that delay compensation
payments, but insurers maximising returns on their capital. Besides,
a delayed payment is be better than no payment, which is what
happens after rights have been removed. Furthermore, personal
injury claims are only a tiny fraction of what courts spend their
time on. Businesses suing each other take up far more time than
suits for personal injury.
4. High damages awards have made public liability insurance
unprofitable for insurers. This has led to un-affordable insurance
premiums or the unavailability of insurance for many activities.
There is no evidence directly linking the cost of insurance premiums
to damages awards. Whether or not premiums collected by insurers
are enough to pay the number of claims made is based largely upon
how the insurer manages the premiums it has collected. Insurers
have a poor record of managing money over the long term, preferring
to take profits, rather than reserve enough for future claims.
Any lack of money to pay claims is more likely a result of poor
planning, rather than rises in claims. When you see a large damages
award in the newspaper it is almost always when the person has
sustained a significant permanent injury that has left the person
severely disabled. In this case the majority of the money goes
to pay for care and re-fitting of the injured person's environment
to cater for the disability. It is not like a lotto win.
5. Insurers are forced to spend huge amounts of money and
resources defending even the most frivolous claims.
Insurers do spend large amounts of money defending claims; all
claims. Regardless of the obvious merits of an injured person's
claim, insurers will pay their lawyers vast sums of money to defend
it rather than pay it out. It is hypocritical of insurers to suggest
that defending claims costs them so much when they are indiscriminate
in their use of defence lawyers.
6. Reducing rights will reduce insurance premiums.
There is no evidence linking cutting rights to compensation
with lower insurance premiums. We have seen in Australia that
after rights were cut premiums continued to rise. In the US, where
the campaign to cut rights has been running far longer, the trend
is that states cutting rights end up with higher premiums than
states that don't cut rights. It has been proposed that this is
because insurers see sympathetic legislators as soft targets,
and take full advantage to maximise their profits.
7. Damages claims are forcing doctors to pay huge amounts
in medical insurance (or indemnity). The result is that many doctors
are giving up their practice, and doctors in training are avoiding
high risk specialties. This will leave us with a dangerous shortage
of doctors, particularly in specialties such as obstetrics.
Doctors leaving their practices is a concern for the public
if it is true. However, threats that we will have doctor shortages
as a result of negligence claims are sometimes as much about attracting
headlines and scaring the public as they are genuine warnings.
Anecdotal stories on talkback radio does not constitute proper
evidence of a looming crisis. Moreover, obstetricians regularly
earn up to $1 million dollars a year. Reports that they may pay
up to $125 000 in medical indemnity don't seem as sensational
in this context.
8. These days people are taking greater risks in their lives,
but are less prepared to take personal responsibility for their
actions.
The argument that people are taking greater risks in their lives
is purely anecdotal. There is no evidence to support it. If anything,
the public is probably more aware of potential dangers than ever
before. Like the "blame culture" argument, the idea that people
aren't prepared to take "personal responsibility" is based more
on myth than objective research or understanding. Moreover, the
argument cuts both ways. Cutting rights to compensation suggests
that people who cause injury to others need not take responsibility
for their actions.
9. Lawyers take large proportions of damages awards, leading
to a situation where the lawyers get rich instead of the injured
person getting justice.
Lawyers who represent the injured are vulnerable to attack from
sources claiming that lawyers are taking disproportionate amounts
of compensation settlements from injured people. The merits of
this argument probably vary from law firm to law firm, and case
to case. But with the amount that insurers are prepared to spend
on lawyers, how can a plaintiff possibly succeed without also
hiring expert services? In any case, the argument is beside the
point. It is ridiculous to contend that justice is better served
by denying the injured person any compensation at all, rather
than have them pay part of their compensation award to a lawyer.
If society believes that lawyers are being paid too much for this
work, perhaps laws should be enacted to address the use of lawyers
by defendents and plaintiffs, rather than denying the injured
compensation. Lawyers are able to focus their efforts on more
profitable practice areas and go on with their lives. The same
cannot always be said of people whose lives are devastated by
personal injury.
Q. Aren't more people ripping off the system by faking
injuries?
A. There is no evidence to suggest that faking injuries
to get compensation is increasing. If anything, advances in medical
technologies, particularly scanning, make it more difficult to
fake an injury.
Q. Isn't Australia in danger of becoming like the US
where everybody sues everybody in search of easy cash?
A. This is a variation on the "litigation explosion"
question. Australian statistics, including those from Victoria's
County Court do not support a "litigation explosion." Opponents
of rights cutting in the USA contend that the USA doesn't actually
have a litigation problem either. It only seems that way because
the campaign to remove rights has been running there since the
1960s. Even if cases were increasing it doesn't necessarily mean
that the system is being abused. It may just mean that more people
are being injured, or more people are accessing their rights appropriately
when they need to.
Q. Hasn't the Victorian Government only removed 'general
damages' for injuries that don't pass the medical threshold? We
can still claim medical expenses and loss of earnings.
A. In theory it is true that damages for medical expenses
and loss of earnings are still available. However, in practice,
by eliminating 'general damages' for injuries that don't pass
the medical threshold the Government has prevented the public
from accessing any damages at all.
This is because insurance companies usually only pay out on
public liability claims where negligence is proven. Most
people cannot prove negligence without hiring expert legal advice
to do it for them. Hiring a lawyer to prove the negligence might
cost more than what the injured person is entitled to in expenses
and lost earnings. In these case lawyers advise people that although
they do have a claim, it would cost them more to run than they'd
receive in compensation. In practice, if not theory, the Government
has removed rights not just to general damages, but to all damages
where the injury is beneath the threshold.
Q. Doesn't the threshold only cut out "slips and trips"
claims?
A. This is what the Government told us when they enacted
the legislation. The legislation they passed removed compensation
for all injuries that aren't permanent. ie. you could sustain
a life-threatening injury that laid you up for any number of months
and put you through any amount of pain. If you eventually recover
below the threshold you are not entitled to compensation. Some
examples of injuries that fall below the threshold are complete
loss of taste and smell, loss of outer ear, or 3.9cm loss of leg
length. You can make up your own mind as to whether these injuries
are well defined as "slips and trips."
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