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Compromise Settlement Offers – An Update By Graham White & Stephanie Wigan | July 2008 Area of Expertise | Workers Compensation

Summary The Supreme Court has recently considered whether an offer of compromise regarding a claim for lump sum compensation under sections 66 and 67 can be only partially accepted.

Who Does This Impact? Workers compensation insurers and self insureds.

What Action Should Be Taken? Any offers of compromise made to the worker should clearly indicate that the lump sum claims under sections 66 and 67 are not divisible.

Reference should be made to the earlier TurkAlert ‘Compromise settlement offers- a caution for insurers’, November 2005. The issue was recently revisited by the Supreme Court in Day v Tuggerah Ventures Pty Ltd [2008] NSWSC 684 (2 July 2008)

Background to the Claim The plaintiff claimed that she was injured during the course of her employment. The plaintiff’s solicitors had served upon the workers’ compensation insurer a claim under sections 66 and 67, as well as a claim for work injury damages. On 3 September 2007 the insurer sent a letter to the plaintiff’s solicitors which stated the following: ‘We refer to your client’s claim for permanent impairment … We have reviewed the case and we would like to offer your client the following entitlement in line with section 66 and 67 of the Workers Compensation Act 1987. $20,000 for 15% Whole Person Impairment $0.00 for pain and suffering. TOTAL: $20,000.’

Two days later, on 5 September 2007 the plaintiff’s solicitors issued the following response: ‘We are instructed to accept your offer in respect of 15% whole person impairment in the sum of $20,000. We are preparing a complying agreement and will forward it to you shortly. We are instructed to reject your offer of $0 in respect of pain and suffering pursuant to section 67. Given the agreement relating to the whole person impairment we invite you to reconsider your position. Are you prepared to make an offer for pain and suffering? In the absence of an offer and settlement of the section 67 component we propose to file an application to resolve the dispute in the Commission in relation to pain and suffering.’

On 11 October 2007, the insurer sent to the plaintiff’s solicitors a letter identical to the letter from 3 September 2007 except that the amount of $7,500 had been inserted for pain and suffering.

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Compromise Settlement Offers – An Update by Graham White & Stephanie Wigan

The plaintiff’s solicitors responded on 18 October 2007. Whilst accepting the amount of $20,000 for the section 66 component and asking for payment, the plaintiff’s solicitors also stated: ‘In the meantime our client instructs us that the offer of $7,500 for pain and suffering is inadequate. We are instructed to place a counteroffer in the sum of $17,500 in respect of the section 67 component.’

No further correspondence occurred between the parties. On 5 March 2008 the plaintiff filed a summons to enforce the $20,000 amount as per the alleged agreement created through the exchange of letters between the parties.

The Issue The issue in dispute was whether the two letters from the insurer dated 3 September 2007 and 11 October 2007 comprised one unified offer of compensation under sections 66 and 67 or whether the letters formed two separate and distinct offers.

The Decision Chief Judge Young found that the two letters comprised ‘one global offer’. It was held that the insurer made one indivisible offer which incorporated the elements from both letters. Therefore the plaintiff could not accept the $20,000 section 66 part of the offer without also accepting the amount of $7,500 for pain and suffering.

The Reasoning The following factors were considered relevant to deciding this matter: a) the factual matrix; and b) the words the parties used. Reference was made to the decision of Thomson v Allianz Australia Workers’ Compensation (NSW) Ltd [2005] NSWSC 885 (Thomson) see the TurkAlert titled ‘Compromise settlement offers- a caution for insurers’, November 2005 for a discussion of this case. Whilst maintaining that it is a question of construction, His Honour found that the two letters together formed one offer. Chief Judge Young noted that whilst it is an ‘irregular’ practice, it was not illegal under the workers compensation legislation to make a global offer. The plaintiff’s reply to the first letter ‘are you prepared to make an offer for pain and suffering?’ was considered to suggest that the plaintiff’s solicitors regarded the issue as involving two parts and that the insurer had only considered one element in their first offer. Ultimately it was considered that the overall impression received from the parties’ correspondence was that there was ‘one global offer’. Therefore being construed as one indivisible offer, the plaintiff could only accept or reject the offer in its entirety and was not at liberty to recognise only selected parts of the offer.

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Compromise Settlement Offers – An Update by Graham White & Stephanie Wigan

Lesson for Insurers The principle announced in Thomson has been reaffirmed as good law. Chief Judge Young ‘could not see any great distinction’ between the present matter and the case decided by Justice Barrett in Thomson. If properly framed, an offer of compromise made by a worker’s compensation insurer regarding a claim for lump sum compensation under sections 66 and 67 must be either accepted or dismissed in its entirety. Once recognised as an indivisible offer of compensation, the offer must be accepted as a whole and cannot be apportioned with only individual components being accepted by the worker. The decisions in both Thomson and Day note that it is a matter of construction as to whether part of an offer can be accepted. As pointed out in the earlier TurkAlert any settlement offer to the worker should make it clear that the lump sum claims under sections 66 and 67 are not divisible.

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Compromise Settlement Offers – An Update by Graham White & Stephanie Wigan

For more information, please contact:

Graham White Partner T: 02 8257 5712 graham.white@turkslegal.com.au

Stephanie Wigan Graduate Lawyer T: 02 8257 5707 stephanie.wigan@turkslegal.com.au

Sydney | Level 29, Angel Place, 123 Pitt Street, Sydney, NSW 2000 | T: 02 8257 5700 | F: 02 9239 0922 Melbourne | Level 10 (North Tower) 459 Collins Street , Melbourne, VIC 3000 | T: 03 8600 5000 | F: 03 8600 5099 Business & Property | Commercial Disputes | Insurance & Financial Services | Workers Compensation | Workplace Relations

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Compromise Settlement Offers – An Update