Interview with Dallas Booth - January 24, 2005
Introduction - The Federal, State and Territory governments
of Australia have enacted comprehensive tort reforms during the past two
years. This interview with Dallas Booth,
Deputy Chief Executive of the Insurance Council of Australia (ICA), examines some of
the key features of the Australian reforms, and their relevance for the United
States.
Dallas Booth - Dallas Booth is the Deputy Chief Executive of
the Insurance Council of Australia (ICA). He
joined ICA in October 1998 to head up a newly created statutory classes
division, and now has senior executive responsibility for ICA’s policy and
research functions, regional offices and media and communications. He led the ICA work on tort reform. From May 2001 until August 2003, Dallas was
Managing Director of HIH Claims Support Limited, the organization running the
Federal Government’s HIH Assistance Scheme. Prior to joining ICA, Dallas was General Manager of the Motor Accidents
Authority of NSW. Dallas was admitted
as a barrister at law in New South Wales in 1980, and has been involved in
legal policy, legislation and insurance issues since that time.
What are the most significant differences in personal injury
tort law between Australia and the United States? Personal injury compensation in Australia and the United States
both reflect the English common law concept of negligence, and damages for
personal injury or death. To this extent, there are many similarities between
the laws of the two countries, although there can be and often are significant
differences on matters of detail. For
example, jury trials (while possible) are rarely used in Australia for personal
injury damages claims, legal costs rules do not permit contingent fees, and
punitive damages are rarely awarded. Australia has some "representative
actions", but does not have the history of class actions of the United States. In Australia, the Federal Government has no
constitutional power over tort law, but some Federal statutes can be used as
the basis of claiming personal injury damages (by claiming breach of a
statutory duty rather than claiming damages for negligence).
Does tort reform in the United States impact tort reform in
Australia? Australian tort reforms
were developed following an Expert Panel Review of the Laws of Negligence. The
Expert Panel was appointed by the Ministerial Forum that was convened to examine
the issue and possible solutions. The solutions chosen largely reflect damages
reforms already introduced in Australia for auto or workplace injuries.
Nevertheless, some regard is had to reforms introduced overseas, including in
the United States. My observation of the tort reform debate in
the United States is that the discussion dwells almost entirely on the rights
of the injured person. In Australia, the debate has accepted the need for fair
compensation for injured people, but has also recognized the important role
public liability insurance plays for community groups, small businesses and
many other organizations who would be financially crippled by a personal injury
damages verdict. Governments have also recognized that such insurance must be affordable
across the community. In other words, there must be a balance between the level
of benefits available for personal injury, and the level of premiums
policyholders must pay to fund those benefits.
What is the history of tort reform in Australia? Since the mid 1980s, Australian States and
Territories have been passing legislation which alters the nature and level of
damages for personal injury arising out of automobile crashes or workplace
injury, death or disease. As in the United States, some States have abolished
tort claims altogether, but in most cases they have been modified by the use of
some form of threshold for claims for general damages (non-economic loss).
What is the current status of tort reform in Australia? Following a crisis in the supply and cost of
public liability and products liability insurance in Australia in 2001 and
2002, tort reforms were also applied to actions for negligence arising in
circumstances other than automobile or workplace death injury. Australia now
has a comprehensive range of tort reforms applicable to virtually all forms of
personal injury claims.
Why was tort reform needed in Australia? Tort reform normally occurs when legislators
accept that the financial and political cost of compensation is more than the
community is prepared to pay. They then take steps to modify the entitlement to
damages or the level of damages to ensure that premiums can remain affordable
and to ensure that cover remains widely available in the insurance market
place. In relation to public liability
insurance, Federal State and Territory Governments agreed to a comprehensive
program of reform because the overall level of claims costs was requiring
substantial premium increases, and ongoing claims cost inflation would require
ongoing premium increases, well in excess of the normal level of inflation in
the economy.
What tort reform solutions have been enacted? Two types of tort reforms have been
introduced in Australia. Firstly, the laws of negligence have been defined in
statute, with a view to removing the capacity to claim personal injury damages
for "obvious risk" or other forms of activity that might contain some
risk but those engaging in the activities effectively assume those risks. The second type of reform limits damages for pain and suffering (general
damages or non-economic damages) in cases of minor injuries. The States and
Territories have adopted a range of general damages thresholds to achieve this
outcome. Federal Trade Practices law
(statute) has also been amended to ensure that a claim for breach of Federal
statute does not provide more generous damages that a claim for negligence.
Is tort reform a national or a state-specific issue? As
previously noted, tort reform is largely the constitutional responsibility of
the States and Territories, although the Federal Government has amended its
Trade Practices statute to ensure it cannot be used as an alternative mechanism
to claim generous damages. The
Australian tort reform program was developed by a Ministerial Forum of finance
or insurance Ministers (Secretaries of State) representing the Federal State
and Territory Governments.
Were the problems and solutions the same or different among
the States and Territories? The problems were
consistent across the States and Territories: the overall cost of claims for damages for
personal injury, and the underlying claims cost inflation. The level of
inflation did vary between States.
Who were the proponents of tort reform in Australia? While it is often asserted that the main
proponents of tort reform were the insurance industry, in reality there was
widespread community protest at the level of premiums insurers had to charge to
fund the cost of public liability claims, and broad media criticism of the
awarding of generous damages in claims were there was little identifiable
negligence, and voluntary assumption of serious risk.
Who are the members of the Insurance Council of Australia
(ICA)? The Insurance Council of Australia represents general insurers
(property and casualty insurers) operating in the Australian market, who are
authorized to operate in Australia by the Federal regulator. ICA members
transact over 90% of the business conducted in Australia, and include the top
15 insurance companies by market share. These include both local and overseas
insurance companies and Lloyds of London.
What benefits do the proponents claim will result from tort
reform? The aim of the tort reform program was to ensure public liability
insurance was readily available for the wide range of community and not for
profit organizations, small businesses and others, at reasonable cost. In other
words, governments aimed to promote the availability and affordability of
public liability insurance.
How will tort reform impact:
- Settlement negotiations? Settlement negotiations now have to
take account of the relevant legislative reforms now applicable to the claim,
depending on the State or Territory of the place of the injury. In many cases
(particularly very minor injuries), only out of pocket expenses will be paid,
and it will not be economically viable for trial lawyers to pursue claims of
this nature.
- Settlement planning? All Australian tort reforms took careful steps to maintain the maximum
level of damages for those with the most severe injuries, particularly those
with serious permanent impairment. There is therefore likely to be little
impact on settlement planning in the case of major injuries.
- Trial process? There
is likely to be a major reduction in the number of personal injury damages
actions in civil trial courts in Australia as a result of these reforms. Where
the general damages threshold is met, the claim will proceed in the usual
manner.
Who were the opponents of tort reform in Australia? The main opponents of tort reform in
Australia are lawyers who regularly represent those who pursue claims for
damages. Some States also have action groups of injured persons.
What were their arguments against tort reform? Those who argue against tort reform believe
justice dictates people who have been injured by the negligence of others
should be able to claim damages. Some also assert that tort reform was not
necessary in the first place, essentially by rejecting the actuarial evidence
of claims costs and claims cost inflation.
Do you anticipate
constitutional challenges? The Federal, State and Territory Governments have now passed
virtually all tort reform measures. There has been no indication of any
constitutional challenge to the reforms.
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