Income Protection in Western Australia:
How It Affects Your Compensation Claims?
Almost all employed people in West Australia contribute to a superannuation fund. A large number of those people have income protection insurance as part of their superannuation, and some people even take out independent income protection insurance separate to super. That means that when you are injured in an accident and can’t work you are protected: you can claim on your income protection policy and can get paid. But what if the accident was caused by somebody else’s fault and you are claiming compensation from that person, does that mean that your claim is reduced because haven’t really lost income?
Collateral benefits
A general principle in compensation law in West Australia is that you cannot recover more than you lost. Therefore if you get paid income protection payments can you still claim lost earnings? What did you lose? The answer is yes, yes you can claim lost earnings. The law has long accepted that when a person takes out a policy of insurance for income protection (whether that is part of your superannuation or not), that is a private arrangement between you and an insurance company – you took out a policy and paid a monthly premium. The Courts have consistently said that an income protection policy is a private contract and no negligent party can take advantage of your private arrangements. The bottom line: if you are in a car accident or in a work accident in Perth, and you get paid income protection payments, you can also claim lost earnings and any income protection payments will not be taken into account when calculating your compensation.
What about workers compensation payments?
What if you are suing somebody but you have been receiving workers compensation payments, will those payments be taken into account. The answer is yes. You cannot get both workers compensation payments and lost earnings. In fact if you get paid compensation for lost earnings then the law says that you must refund any workers compensation payments back to the workers comp insurance company. Why, what’s the difference? Because workers compensation payments are paid pursuant to a statutory scheme, a scheme set up by the State of WA. But income protection payments are a private arrangement: it is something you choose to take out.
Can you get interest on the lost income even though you got income protection payments?
In a recent case a claimant was injured in a car accident in Perth and sued the negligent driver for compensation. The District Court awarded the claimant nearly $850,000, including about $350,000 for her lost wages. Of that $350,000 more than $90,000 was paid as interest on the lost wages. The Defendant was unhappy and appealed to the Supreme Court. They had no problem with excluding the income protection payments from the calculation, but their problem was that they shouldn’t have to pay interest because she had not been out of pocket while the case was being run. Basically the insurance company argued that the claimant did not suffer any actual loss in earnings at the time because she was getting income protection payments, so she shouldn’t get interest on top of the lost wages.
The Supreme Court disagreed. The Court said that a claimant can claim interest because she was kept out of the compensation that was owed to her for the time between the date of the accident and the date when the Court gave her the compensation. The Insurance company argued that in other cases the Court had taken into account payments received from workers compensation and other statutory schemes. But the Supreme Court said that that that was different, that in this case the money she had been getting was from a policy that she had taken out, and that the insurer can never benefit from that, therefore they had to pay interest on top.
The bottom line
- You can claim lost earnings and you don’t have to take into account any income protection payments that you get along the way.
- You can claim interest on the full amount of your lost earnings and you do not have to take into account anything you got paid by income protection.
- But if you got paid workers compensation benefits, then you must take those into account and repay the workers comp back to the workers comp insurer.
