Medical Negligence in NSW

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Each year, thousands of people in NSW (New South Wales) Australia are affected by medical malpractice. Many claims are settled out of court but many more go without compensation because of difficulties imposed by State law. The NSW government has legislated away patient's entitlements over the last 15 years.

Background to the 'medical indemnity crisis'

Around early 2000, there was a call by doctors for the government to address the issue of their rising medical premiums. A major NSW medical indemnity organisation known as United Medical Protection (UMP) called on its members to pay a full year's premium, on top of an 8% premium increase.

Medical defence organisations (MDOs) at that time were not monitored by insurance industry regulators as they were discretionary mutuals rather than insurance companies. They were therefore not required to abide by minimum accounting standards for known claims or estimated liabilities. A NSW parliamentary paper at the time stated that the lack of financial transparency of MDOs meant it was difficult to understand the precise relationship between the current premiums being charged and medical negligence claims.

MDOs argued that the cause of their increasing premiums was the rise in medical negligence claims over the last 10-15 years. A more likely explanation for the increase in premiums was that UMP had only recently started accounting for Incidents Incurred But Not Reported (IBNRs) liabilities. Additionally, there had been a recent unravelling of traditional cross-subsidising between low-risk and high-risk medical practice through cherry-picking by new players in the market. Another factor was that MDOs costs were rising due to provision of legal services unrelated to medical negligence civil claims, such as defending doctors in medicare fraud cases and allegations of sexual misconduct and disciplinary hearings. Most MDOs were also not charging an excess when a claim was made (unlike most other categories of insurance).

The business practices of medical defence organisations themselves were contributing to the rising premiums. Doctors were fed up with rising premiums and many threatened to walk out from areas of high need such as rural practice. The reporting of the case Simpson v Diamond [2001] NSWSC 925 which resulted in the highest award of medical negligence to date led to mass hysteria. Large awards were extremely rare in medical negligence.

Health Care Liability Act ("HCLA")

The NSW government introduced the Health Care Liability Act ("HCLA") in 2001, commencing on 5 July 2001. The legislation was preceded by an extensive campaign by doctors in NSW, especially those specialists affected by high insurance premiums, with the aim of reducing the extent of compensation awarded in medical negligence actions and to reduce the number of claims.

The then Minister for Health, Mr Knowles identified 5 principal reasons for the legislative reform (Hansard 19.06.01):

• The rising costs of medical indemnity premiums and calls on members- the so called "medical indemnity crisis".
• The threatened withdrawal of medical services, particularly in rural areas.
• "Cherry picking" by new insurance companies focussing their market share on lower risk claims, forcing a retreat from the practice of cross-subsidisation. This would in effect increase the exposure of insurers accepting the high risk specialties.
• Concerns regarding the activities, financial position and financial regulation of medical defence organisations, especially following the collapse of HIH.
• The undesirability of medical practitioners who refuse to take out professional indemnity insurance. It used to be the case that doctors did not have to carry insurance, so if sued, a claimant would miss out on compensation if the doctor had very few or no assets. The HCLA introduced compulsory insurance.

Health Care Liability damages reduced

So the point of the HCLA was to try to contain rising medical indemnity premiums by imposing certain limitations on the amount of damages that could be recovered, including:

• Caps on non-economic loss of $350,000 indexed annually, that could only be awarded "in a most extreme case." Most extreme case would probably be paraplegia - see Dell v Dalton (1991) 23 NSWLR 528; brain damaged young person - see Marlsand v Andjelic (No.1) 1993 (1 NSWLR 162).
• No damages to be awarded for non-economic loss unless the severity was at least 15% of a most extreme case (which at common law would be claims with general damages under $52,500). This would affect claims where a patient has received negligence treatment but the "damage" is minor eg minor scarring, minor dental claims, minor complications post-operatively that have not resulted in any permanent damage.
• Exclusion of awards for interest for non-economic loss.
• Sliding scale damages for non-economic loss with severity between 15%-33%. This sliding scale is founded on an artificial construction as to degrees of impairment which have no place in clinical medicine.
• Capping of Loss of Earnings.
• Increasing the discount rate (on future expenses and future wage loss) from the common law rate of 3% to 5% under the HCLA.
• Removal of exemplary and punitive damages.

Civil Liability Act NSW 2002 (“CLA”)

In 2002, massive increases in the cost of public liability insurance in the wake of the HIH collapse had provoked politicians to make sweeping changes to the law of negligence. The Commonwealth and State governments appointed A “Panel of Eminent Persons” to review the law of negligence (the Ipp Review). Between 2002 – 2004 the legislatures in every Australian jurisdiction enacted significant tort law reforms, many of them inspired by the Ipp Review.

The NSW government enacted the CLA, which retrospectively commenced in 20 March 2002. The CLA applied to all personal injury damages “that relate to the death of or injury to a person caused by the fault of another person”, with limited exceptions. The Health Care Liability Act was substantially amended by the CLA and the Civil Liability Amendment (Personal Responsibility) Act 2002. Various sections of the HCLA were repealed, leaving in place provisions relating to compulsory insurance for doctors.

The Civil Liability Act NSW 2002 contains provisions which limit the recovery of damages in most areas of personal injury law, including medical negligence in NSW. The CLA mirrors many of the provisions that were contained in the HCLA, including caps on loss of earnings; a cap on general damages and a sliding scale with a minimum threshold of 15% of a most extreme case; limitations on damages for gratuitous attendant care services.

Medical malpractice litigation was not the cause of rising premiums

A study in 2006 by Professor E W Wright of the University of Newcastle, NSW, "National Trends in Personal Injury Litigation: Before and After 'Ipp'", stated that data had shown:

"contrary to widespread belief, litigation rates had not, generally, been increasing in the period leading to the Ipp Review. This finding provides no empirical foundation for the premises underlying tort law reform as a strategy for addressing the insurance crisis in 2002. It is evident that the reformers could have had no empirical foundation, either for predicting the impact of the reforms on personal injury litigation in their jurisdictions, or for determining by how much it was desirable to reduce it," page 3.

Professor Wright analysed the number of claims filed in Courts across jurisdictions. In NSW, data was available from the Supreme Court of NSW Registry and the District Court of NSW (Sydney Registry only), and concluded that "personal injury litigation rates in New South Wales were apparently comparatively stable between 1996 – 2000" and following the reforms "the decline in cases filed between 2003 – 2005 is substantial"; "the decline in tort litigation produced by the reforms is over 60%" page 17.

An ACCC report in 2009 "Medical Indemnity Insurance: Sixth Monitoring Report", noted "insurers generally indicated that the number of claims had decreased as result of tort law reform."

The NSW government successfully took away patient's rights to compensation on the false assumption that rising litigation was to blame for doctor's rising insurance premiums.

NSW Public Hospital claims

What do we currently know about the number and size of claims in NSW? Very little public information is available.

On 31 January 2016, The Sunday Telegraph reported a story "NSW Hospital Blunders have cost State taxpayers more than $262 million in damages." Based on information obtained under freedom of information laws, it was revealed that from 2011-2015 the number of cases where compensation was paid and the amounts paid (rounded figures) were:

1. John Hunter Hospital, Newcastle: 104 claims totalling $31 million. This hospital had the highest number of claims in NSW.
2. Maitland District Hospital: $12.1 million; 30 claims.
3. Dubbo Base Hospital: $10.9 million; 46 claims.
4. Wollongong Hospital: $9.7 million; 83 claims.
5. Westmead: $9.3m; 91 claims.
6. Nepean: $7.4m; 72 claims.
7. Gosford: $7.3m; 56.
8. Concord: $6.2m; 25.
9. Lismore Base Hospital: $5.2m; 42.
10. Wagga Wagga: $4.9m: 62.
11. St George Hospital, Kogarah: $4.5m; 59.
12. Royal North Shore, North Sydney: $4.8m; 45.
13. Bowral: $4.6m; 7.
14. Bankstown Hospital: $3.8m; 24.
15. Canterbury Hospital: $3.2m; 25.
16. Campbelltown Hospital: $2.4m; 37.
17. Blacktown: $2.3m; 39.
18. Coffs Harbour Health Care Campus: $2.3m; 17.
19. Fairfield: $2.2m; 6.
20. Brewarrina District: $1.3m; 19.

NSW Private Hospitals compensation

Data on the number of compensation claims made against private hospitals is difficult to find, as is information on claims in the private sector (GPs, medical clinics). The Australian Institute of Health and Welfare (AIHW) published a report "Australia's medical indemnity claims 2012-13". The report looked at data from public and private hospitals throughout Australia (excluding Western Australia).

In 2012-2013, the number of private sector claims was much higher than public sector claims (3,278 new claims compared with 947 new claims in the public sector). The number of new public sector claims was less than any of the previous 4 years, however the number of new claims for the private sector was about the same for the last 2 years. Very few claims went to court; most settled out of court.

What is clear is that the private sector has a much higher rate of medical indemnity claims than the public sector, however the reasons for this is unclear.

Malpractice claims lawyers in NSW

For victims of medical negligence finding the right solicitor can be a difficult task. Medical law is a specialised area of practice that has undergone considerable change over the last 15 years. Our Sydney medical negligence solicitors handle claims across NSW and are experts in interpreting the common law and legislative requirements to establish a case.

If you would like free legal advice without obligation on whether you can make a NSW compensation claim under a No Win No Fee agreement, contact our service today. It is important that you seek legal advice as soon as possible from a lawyer experienced in this area of law as time limits apply. Complete the contact form on this page or call our free helpline.

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