November 2012

How to deal with lump sum claims under the 2012 amendments

The recent decision of Goudappel v Adco Constructions Pty Limited determined that insurers can decline liability for all valid claims for permanent impairment compensation made on or after 19 June 2012 where the degree of whole person impairment (‘WPI’) does not meet the threshold of 11% WPI.

The Relevant Amendments

Section 66(1) of the Workers Compensation Act 1987 (‘the WCA’) has been amended by Schedule 2 of the Workers Compensation Legislation Amendment Act 2012 (the Amending Act). This amendment effectively removes any entitlement to lump sum compensation for a permanent impairment of less than 11% WPI.

The transitional provisions governing the amendments which are now contained in Schedule 6, Part 19H, Clauses 3 and 15 of the WCA govern the application of the amendments. Clause 15 states as follows:

"An amendment made by Schedule 2 to the 2012 amending Act extends to a claim for compensation made on or after 19 June 2012, but not to such a claim made before that date.”

The question of law which came before the President in Goudappel’s case concerned a question of statutory construction of the application of the amendments, and specifically, the meaning of the phrase “claim for compensation made”.

One construction of the phrase is that it should be read to mean a claim for lump sum compensation made. The effect of this interpretation is that the amendments will apply to all lump sum claims made on or after 19 June 2012, regardless of whether a claim for any other type of compensation in respect of the injury was made before 19 June 2012.

The other construction is that this phrase refers to a claim for any compensation made. If this approach was adopted, the amendments would not apply to a worker who made a claim for lump sum compensation on or after 19 June 2012 for an injury where he or she has previously claimed any compensation benefits in respect of that injury.

Brief Background and Facts of the Case

  • The applicant sustained an injury on 17 April 2010.
  • He made a claim for compensation on 19 April 2010.
  • On 14 July 2011, the applicant was assessed by a consultant orthopedic surgeon as having a 6% WPI in respect of the injuries he sustained.
  • On 20 June 2012, the applicant’s solicitors made a claim for lump sum compensation pursuant to section 66 of the WCA for a 6% WPI.
  • On 3 July 2012, the respondent disputed the applicant’s entitlement to compensation on the basis that the claim fell below the WPI threshold in section 66(1) of the WCA, as amended.
  • The applicant subsequently commenced proceedings. On the Arbitrator’s motion, the dispute was ultimately referred to the President for determination on the basis that it involved a question of law.

The Decision

President Judge Keating construed the phrase “claim for compensation made” to mean claim for lump sum compensation made. That is, he held that the amendments made by Schedule 2 of the Amending Act applied to all claims for lump sum compensation made on or after 19 June 2012, even if a worker had made a claim for compensation of any type in respect of the same injury before that time.

For Goudappel, this meant he was not entitled to lump sum compensation for a 6% WPI because he had made his lump sum claim on or after 19 June 2012 and he had not been assessed as suffering a WPI greater than 10%.

The President’s decision was primarily based on principles concerning statutory construction of the amendments. He also had regard to the general legislative purpose of the Amending Act, which he said was to “reduce the benefits payable to less seriously injured workers and, in limited circumstances, increase benefits payable to more seriously injured workers”.

Tips for Insurers

Employers and insurers should now consider taking the following approach in respect of  impairment claims made on or after 19 June 2012:

  • If the worker’s impairment assessment does not meet the 11% WPI threshold, the claim should be declined on the basis that the worker has not reached the new section 66(1) threshold. A section 74 notice should be served on the worker which disputes the claim on the basis of section 66(1) of the Amending Act and in accordance with President Judge Keating’s decision in Goudappel.
  • If the worker’s impairment assessment is at least 11% WPI, the worker is entitled to have his claim referred to an AMS.
  • Dispute all section 67 claims.
  • Dispute further impairment claims for the same injury.

Please note: This decision does not apply to police officers, paramedics, fire-fighters, coal miners, emergency service volunteers or workers with a dust disease claim.