Driving at work takes a wrong turn

Driving at work has taken a wrong turn for Victorian employees since the Accident Compensation Act 1985 abolished common law claims in November 1997 because the Transport Accident Act 1986 deems people driving during working hours to be covered by the WorkCover scheme. This creates a significant inequity for both incorporated small business operators and their workers.

None of the ‘employee’ directors of Victoria’s 69,512 incorporated small businesses have a right to common law damages. Yet, under the TAC legislation, owners in unincorporated partnerships do but their employees don’t.

So if the owner of an unincorporated courier service and an assistant are driving back to the depot from a night time delivery, and are hit by a drunk driver and suffer identical injuries, the boss can sue at common law for his pain and suffering, whereas the assistant cannot.

The high point of this injustice is that if the owner had taken the time to incorporate his courier business, he would be trapped in the WorkCover scheme. He could not access common law benefits, despite the fact that his injury, and the destruction of his business, was caused by a negligent road user.

It is no safer as an employee. In December 1998, driver Chris Blanche was not just caught in a devastating motor accident when his brakes failed, he was caught in an unfair legislative trap. Despite pointing out to his employer that his truck’s brakes were worn, Chris was ordered to drive an overloaded vehicle from Footscray to Dandenong. Not far from base, his brakes gave out and his truck careered into another truck. Chris had both his legs broken and had to be cut from his vehicle. He was in hospital for ten weeks, and contracted a golden staph infection in his right leg. It will be amputated soon if it does not respond to one final treatment.

If he could claim at common law he would probably receive $450,000, but under WorkCover his award will be between $30-60,000. His weekly income has also dropped from a wage of $900 pre-injury to $340 in benefits. It is very hard for him and his wife to make ends meet, let alone deal with the emotional and physical trauma. His insurer is constantly late with his payments, and will not pay for his rehabilitation expenses. Chris is now retraining himself as a lawn-mower mechanic, as he is determined to work.

The final insult to Chris was that he was charged with driving an unroadworthy vehicle by the Police, and WorkCover has not prosecuted his employer.

The Transport Workers Union has 22,000 members who would be caught if injured, and they estimate there may be as many as 40,000 employees who drive during work hours who could be affected.

In most cases, the employers are being charged the full insurance rate, yet are not able to give their drivers full personal injury protection. Taxis must pay Vic Roads $1682 to register, of which $1542 is allocated to the TAC insurance premium but this premium will not benefit employee drivers. The TAC seems to be ‘double dipping’ with premiums.

Parliament must amend the Act so Victorians can elect which scheme they seek benefits from.

There are other problems with the Act. Weekly benefit levels were originally set too low, and have remained so due to indexation.

High and middle salary earners ($45+k per annum) are also under compensated due to caps. They also have no incentive to return to work, because where they return to lesser paid work, they receive no "gap" compensation. Under the Act, compensation for partial loss of income is reduced by a dollar for every dollar over $707 per week that the rehabilitated person earns, regardless of whether this amount is lower than what they were originally earning. Thus a computer programmer earning $2000 per week who suffered brain injury but was able to return to lesser quality work earning $1000 per week would not be entitled to compensation for the loss of earning potential due to their injury.

The Common Law threshold has also been set too high. Over the last eleven years 5,748 injured people have been able to access Common Law, but in the second reading speech it was projected that this figure would be 48,000. Common law access is harder than originally intended by Parliament.

The law needs to be changed to allow for another category of injuries that are "grave or life threatening for a period of time".

This new category would cover less catastrophic, but still serious, injuries that cannot pass the current threshold but are those Parliament originally intended to remain in the common law sphere.

The TAC is also addressing costs by attacking isolated service providers, or ‘stakeholders’, and forcing them to reduce their price. They have done this with Long Term Care Recipients, Anaesthetists, Dentists, Physiotherapists, Lawyers and now Pharmacists. TAC calls this tactic "Tensioning the soft end of the market", because they view these groups as those who have no choice but to comply with TAC reductions.

Margaret Denys is a permanent comatose crash victim, and she needs creams and other non-prescription products applied for bedsores. But late in 1998 the Act was amended to limit pharmacy expenses to those requested by a medical practitioner or dentist. The products she needs would be free if she were in hospital, but TAC will not let her stay in an institutional care environment. So now her relatives have to get prescriptions or pay for products themselves. Not only does this policy target a vulnerable group, it might in some cases result in an increase of costs to the TAC, requiring additional attendances on doctors in order to obtain, say, a prescription for Panadol. On the other hand it might result in many claimants choosing to pay for it themselves. Whether this is a valid amendment for audit purposes, or a cynical play on victims of road trauma, remains to be seen.

One of the ironies of the situation is that since restrictions on common law damages were introduced, operating surpluses have been huge. But savings have not been passed on to consumers with premiums actually increasing over the period.

The TAC admits some confusion as to why its costs are not falling when they seem to be reducing expenditure at each turn. Some of this must come down to its being a no fault system, which statistics show are more expensive than Common Law systems.

Both US and Canadian statistics confirm this. Ontario provides a good case study as Canada has a similar public health system to Australia. The introduction of no fault schemes in that province resulted in premium decreases of 1-2% per annum when benefits were cut by 47% [1991-2] and premiums rises of 7-12% per annum when benefits were restored [1993+].

Administrative costs increase in no fault. The Victorian TAC employs 600 people whilst the NSW MAC employs less than 40.

Other factors associated with scheme costs include insurer profit margins, changing public health policy, improved community awareness of rights and ageing populations.

No Fault compensates twice as many people with both innocent and negligent parties being payed. Average profit per policy in the US in 1995 was $25 in tort states and $39 in no fault states as the wider pool of insured provides greater economies of scale.

No fault creates more claims through personal injury, property and third party claims. Lawyers are called in by client to sue insurers for not honouring policies.

Insurers in no fault systems have no incentive to speedily process claims as they earn money whilst they retain premium income in their investment portfolio. In contrast, well case managed litigation allows increasingly quick resolutions.

The cost of road deaths in Victoria has not been reduced by the restriction on common law access, even though the numbers of common law cases are declining as this graph shows.

 _{Chart prepared by Cumpston Sargeant Pty Ltd, Actuaries}

Conclusion

The Transport Accident Act 1986 discriminates against working drivers by prohibiting them from claiming common law benefits when they are seriously injured, even though their vehicle registration includes a premium to cover this cost.

Victorians’ need sections 37 and 38A of the Act amended so injured people can elect which scheme they seek benefits from.

In the rest of the scheme, common law access is harder than originally intended by Parliament. We should expand access up to the level originally intended by adding a second gateway for injuries that are "grave or life threatening for a period of time".

The TAC scheme is highly profitable, and not returning adequate benefits to injured people.