June 2008

Work injury damages threshold - recent case highlights the importance of managing impairment claims

For a worker to recover work injury damages there must be 15% whole person impairment (WPI) or more in respect of the work injury. If there is disagreement on this threshold, it can be resolved through the Workers Compensation Commission (WCC) by referral to an approved medical specialist (AMS) for a binding impairment assessment.

Traditionally workers with potential work injury damages claims have pursued impairment entitlements under sections 66 and 67 first. In many cases the worker either reaches agreement with the insurer or obtains an AMS impairment assessment of 15% or more in the context of the section 66 claim. Then when that claim is resolved, the worker pursues work injury damages, utilising the section 66 impairment outcome.

There has always been a question about whether a section 66 impairment settlement of 15% WPI or more necessarily satisfies the work injury damages threshold. The NSW Court of Appeal recently made a pronouncement on this issue.

Court of Appeal decision

In JC Equipment Hire Pty Limited v The Registrar of the Workers Compensation Commission of NSW (decided on 31 March 2008) the Court of Appeal held an agreement on the degree of permanent impairment for the purpose of section 66 does not constitute an agreement on permanent impairment for any other purpose, including a work injury damages claim.

The worker brought a claim for lump sums under sections 66 and 67 which was resolved by agreement for 16% WPI. He then made a claim for work injury damages. The insurer disputed the 15% WPI threshold, having recently obtained an impairment assessment of 12% WPI. The insurer requested a WCC threshold assessment for the purpose of the work injury damages claim. The worker disagreed and proceeded with the work injury damages claim. The insurer opposed the claim unsuccessfully in the WCC, arguing the worker’s  pre-filing statement was defective. The WCC held there was no threshold dispute. The matter then escalated into the Administrative Division of the Supreme Court where the insurer again failed.

The worker argued the insurer had already accepted the injury produced 16% WPI by entering into the section 66 agreement. The worker further argued the insurer was estopped from denying he had 16% WPI in the context of the damages claim because of the earlier agreement.

The Court of Appeal rejected the worker’s argument. It found the earlier agreement applied only to the impairment claim, observing the worker had not at that time made a claim for work injury damages. The court also observed lump sum compensation claims are often settled for good commercial reasons without recourse to the dispute resolution system of the WCC.

The court observed work injury damages claims give rise to different considerations and have significant financial consequences for both worker and insurer, hence the different treatment of the threshold issue when it comes to a damages claim. The Court of Appeal differentiated the provisions in the legislation requiring an insurer to respond to a work injury damages claim and the associated threshold issue from the legislative provisions applicable to an impairment claim under section 66.

WorkCover Edict

Following this decision, the WorkCover Authority issued Operational Instruction 1.24 (to scheme agents) and Self Insurer Guideline No 08:06 (to self and specialised insurers). The two documents have the same effect. They direct scheme agents, self insurers and specialised insurers to refrain from raising threshold disputes in response to work injury damages claims where previous section 66 settlements of 15% WPI or more exist. These directives apply irrespective of new medical evidence or assessments which may have emerged since the previous impairment settlement factoring in undeclared injuries or pre-existing conditions or the application of proper apportionments.

Therefore, if an insurer agrees a worker has 15% WPI or more in resolving a lump sum compensation impairment claim, the WorkCover directive obliges the insurer to refrain from raising a threshold dispute on a subsequent work injury damages claim. The directive is also said to apply to commutation applications and requests for domestic assistance.

The message from WorkCover is clear. Deal with impairment claims properly. If there is a dispute on percentage WPI, proceed to AMS assessment. That will give rise to a binding assessment of impairment for all purposes, notwithstanding the decision of the Court of Appeal in JC Equipment Hire Pty Limited v The Registrar of the Workers Compensation Commission of NSW. If issues need to be raised about impairment, this should occur at the sections 66 and 67 claim stage and should not be left until the work injury damages claim materialises. If the claim has "common law" potential, it is prudent to interrogate impairment at the section 66 and 67 stage.

Author: Mick Franco