Report of the Ministerial Advisory Panel on Work Related Gradual Process Disease or Infection
Section 31 Injury, Prevention, Rehabilitation and Compensation Act 2001
Part 4 - Parliament's Responses to the Woodhouse Vision
27. New Zealand's Accident Compensation regime has been subjected to almost continuous change since the passing of the Accident Compensation Act 1972. There have been no less than five major legislative re-writes of the scheme and 38 amending Statutes. The accident compensation scheme has been changed and modified by Parliament in the following principal statutes since the passing of the Accident Compensation Act 1972:
Accident Compensation Amendment (No.2) Act 1973
Accident Compensation Act 1982
Accident Rehabilitation and Compensation Insurance Act 1992
Accident Insurance Act 1998
Injury, Prevention, Rehabilitation, and Compensation Act 2001.
28. Each major legislative change to the accident compensation scheme has been preceded by reports which have explained the policy and political reasons for change. It is instructive to briefly explain the background to the key changes that have occurred to New Zealand's accident compensation scheme. There are two reasons for undertaking this particular exercise; namely:
28.1 To demonstrate how successive statutes have responded to the Woodhouse principles; and
28.2 To explain the policies that have led to the law currently set out in s.30 of the IPRC Act.
29. It has always been apparent that the Woodhouse Report contained a complex set of policy considerations which were readily susceptible to attack by influential sections of our community. It is also apparent that Sir Owen Woodhouse developed and expanded his principles in two subsequent reports which need to be considered in conjunction with the first Woodhouse Report.
29.1 The Australian Government commissioned Sir Owen Woodhouse to prepare a proposal to reform that country's compensation scheme[7]. The Australian Woodhouse Report recommended cover for disability arising from sickness, disease and congenital incapacities.
29.2 The "Third Woodhouse Report" was prepared by the Law Commission when Sir Owen Woodhouse was its president. In its report "Personal Injury, Prevention and Recovery"[8], the Law Commission recommended an end to the "inequality of luck" which flows from providing cover for those who suffer personal injury by accident, but not to those who are disabled by sickness or disease.
Accident Compensation Act 1972
30. The Accident Compensation Act 1972 gave legislative effect to approximately half the recommendations in the Woodhouse Report[9]. The Woodhouse Report was followed by a "commentary"[10] and a Parliamentary Select Committee Report.[11] It has been said that each of these reports which followed the Woodhouse Report was "…closer to the political process than its predecessors with the result that the amount of pragmatism … increased and the amount of principle and clear vision … decreased".[12]
31. When originally enacted the Accident Compensation Act 1972 did not attempt to define "personal injury by accident". The Act provided that "personal injury by accident" included incapacity resulting from occupational diseases as prescribed in the Act. Cover for occupational diseases occurred in the following circumstances:
31.1 If the incapacity was caused by a hernia;
31.2 If the incapacity resulted from "disease due to the nature of employment" and the incapacity occurred within prescribed periods;
31.3 The incapacity was "industrial deafness".
32. The Accident Compensation Amendment (No.2) Act 1973 introduced a number of changes to the ACC scheme before its commencement on 1 April 1974. A limited definition of personal injury by accident was adopted in 1975. That definition included incapacity arising from an occupational disease or industrial deafness.
Accident Compensation Act 1982
33. The most significant feature of the Accident Compensation Act 1982 was that it converted the scheme from one based upon the principle of being fully funded to one that was "pay as you go". This change was to have major implications for the ACC scheme over the ensuing 20 years. An almost immediate consequence was a 34.5 percent reduction in levies. This reduction in levies then affected the level of reserves which had built up since 1974. By 1986 it was apparent that levies had to again be substantially increased. This factor, perhaps more than any other, politicised ACC policies. In 1986 the then Labour Government increased levies very significantly. This in turn provoked the National Opposition to pledge a reduction in employer's levies if elected to the Government benches.
34. The definition of personal injury by accident in s.28 of the Accident Compensation Act 1982 continued to include "incapacity resulting froman occupational disease or industrial deafness…". The scope of cover for those who suffered diseases arising out of employment was broadened so that any incapacity resulting from a disease due to the nature of employment could be the subject of cover provided the claimant was employed in an occupation that gave rise to their disease after 1 April 1974. The 1982 Act continued to provide cover for "industrial deafness".
35. Section 28 Accident Compensation Act 1982 was carefully examined by the Court of Appeal in West v Firestone Tyre and Rubber Co of New Zealand Limited[13] a case involving asbestos related cancer. The Court noted that for a claimant to have cover for a disease arising out of employment under the 1982 Act the following needed to be established:
35.1 That the disease was caused by the nature of any employment;
35.2 The question of causation was answered by determining whether the claimant's work had some particular "quality, characteristic or incident" which distinguished it from work generally and which was a substantial cause of the disease.[14]
The Court of Appeal said it was not necessary that the claimant's disease be a recognised or inherent risk of the particular trade or occupation or the particular type of activities in which the claimant was employed. It was enough that the particular employment had something in it which caused or contributed to the disease, regardless of whether other employment of the same class had a tendency to do so.
35.3 The Court of Appeal said "incapacity" under s.28 Accident Compensation Act 1982 was not confined to economic incapacity but referred to "purely physical incapacity".
36. The financial pressures on the ACC scheme during the 1980's inspired a revision of the scheme by the Law Commission. The Law Commission, under the presidency of Sir Owen Woodhouse prepared two reports; one focused upon funding[15] and the other examined amongst other issues, the scope of cover of the scheme.[16]
37. The Law Commission's substantive report was released a month after a Royal Commission of Inquiry on social policy stated it could find no justification for the stark inequality caused by society's response to the injured compared to the sick and disabled. The authors of the Royal Commission Report said:
"Sickness, and injury and disability are hazards of life to which all are potentially subject. It has been increasingly accepted that the community should bear a share of the costs of relieving some of the burden of individual victims and their families. But developments have occurred in a piecemeal fashion and on any application of the criteria of equity and efficiency present arrangements fail badly. A person struck down by disease may suffer the same kinds of economic and social loss as are sustained by a person struck down by a car, yet the community's response as measured by community funded support is markedly different. "[17]
38. The Law Commission recommended abolition of lump sum benefits which at that stage were capped at $27,000. Lump sum payments were at that time disproportionately high compared to periodic payments. The Law Commission reasoned that lump sum payments were an anomalous vestige of common law damages and that their abolition would assist in the funding of those disabled by sickness. The Law Commission referred to the omission of sickness from the original scheme in the following way:
" So it seemed wise to take only one step, at least for the time being. But clearly the demarcation is anomalous. It is the kind of situation which gives hard emphasis to what has been called the 'inequality of luck'. It ought to disappear. And sooner rather than later. But how? … Some will assume that … there would be insurmountable expense …
It is easy to be beaten in advance in matters such as this. In the present context we think it possible for sickness incapacity to be brought within the injury scheme without any wholesale retreat from principle. After the repeal of lump sum compensation … it could be done by stages: first by providing health services on an equal basis: then by accepting congenital incapacities already supported by the social welfare system or which become manifest by a defined age; later by taking in higher level disabilities; and finally others less serious".
39. The Law Commission noted that the accident compensation scheme already provided cover for industrial disease and this provided sound precedent for placing sickness into an injury compensation system.
40. The Government appointed a working party under the chairmanship of Sir Kenneth Keith, then of the Law Commission, to further develop the policy of extending ACC cover to sickness.[18] The Government's intention to expand the scope of cover was announced in the 1989 Budget.[19] The legislation to implement the Government's policy was introduced as the Rehabilitation and Incapacity Bill 1990. That Bill was never enacted.
Accident Rehabilitation and Compensation Insurance Act 1992
41. Upon being elected to office in 1990 the National Government proceeded to deliver on its pledge to reduce the cost of levies to employers. The new Government took the view that the "cost of the [existing] scheme was unsustainable".[20] Three reports soon emerged.[21]
42. The final report in the trilogy of reports delivered at this time (Accident Compensation - A Fairer Scheme) was released in conjunction with the 1991 Budget. The Hon W Birch said in that report:
" ... since the inception of the scheme, a series of statutes, administrative, and judicial decisions has resulted in an extension of the scheme's boundaries beyond what was originally intended in respect of 'injuries' arising from 'accident'; and this has resulted in substantial cost increases."
In the same document it was said:
"The Government has considered that the scope of the Act would be more easily understood if the conditions intended to be covered were separately identified …
Coverage for occupational disease will be similar to the present scheme … the new legislation will provide a clear definition."
43. The Accident Rehabilitation and Compensation Insurance Act 1992 contained extensive definitions of:
43.1 Accident.[22]
43.2 Personal injury.[23] Personal injury was defined to mean death, physical injuries and mental injuries arising from physical injuries.
43.3 Gradual process, disease, or infection arising out of and in the course of employment.[24]
44. Before there could be cover under the Accident Rehabilitation and Compensation Insurance Act 1992 a claimant needed to suffer personal injury caused by either:
44.1 Accident; or
44.2 Gradual process, disease, or infection arising out of and in the course of employment; or
44.3 Medical misadventure; or
44.4 Treatment for personal injury.[25]
45. The requirements that a claimant suffer personal injury and the definition of gradual process, disease, or infection need to be examined in some detail because these provisions in the 1992 Act became the statutory template for subsequent legislation.
Personal Injury
46. It is apparent from Accident Compensation - A Fairer Scheme that the Government of the day was concerned about Court decisions which, it was thought, had extended the scope of cover beyond the scheme's original boundaries. A case which caused considerable concern was ACC v E[26] in which the Court of Appeal held that under the Accident Compensation Act 1982 it was not necessary for a claimant to have suffered physical injury in order to have cover for personal injury by accident when he was incapacitated by mental injury. The 1992 Act "plugged" this perceived lacuna by requiring that all claimants have suffered either death, physical injuries, or mental injuries arising from physical injuries as fundamental preconditions to cover.
Gradual Process, Disease or Infection
47. An extensive definition of gradual process, disease, or infection was introduced into the Accident Rehabilitation and Compensation Insurance Act 1992 because of concern about the lack of precision to the term "occupational disease or industrial deafness" found in the definition of Personal Injury by Accident in the Accident Compensation Act 1982.
48. The definition of gradual process, disease, or infection in the 1992 Act stipulated a claimant could only have cover for a gradual process, disease, or infection if:
48.1 They suffered personal injury;
48.2 Since 1 April 1974 their employment or work environment had a particular "property or characteristic" which caused or contributed to the claimant's personal injury;
48.3 The "property or characteristic" in question was not found to any material extent in the non employment activities or environment of the claimant;
48.4 The risk of suffering the personal injury in question was significantly greater for persons performing the particular employment task in that environment.
49. Personal injury caused by air conditioning systems or passive smoking were specifically excluded from cover. Similarly personal injury relating to "non physical stress" was also excluded from the definition of gradual process, disease or infection.
50. The date a claimant was deemed to have suffered from a gradual process, disease, or infection was assessed by reference to either:
50.1 The date the claimant first received treatment for their condition; or
50.2 The date they first became disabled.
51. Where a claimant was employed by one or more employers which resulted in their exposure to the risk of gradual process, disease, or infection then the costs of their claim were to be divided between the employers in proportion to the claimant's periods of employment.
52. The definition of gradual process, disease, or infection excluded those who had cover under the Workers' Compensation Act 1956 for industrial deafness. Instead, a series of criteria were put into place for assessing whether or not deafness was caused in the course of employment.
Accident Insurance Act 199853. The Accident Insurance Act 1998 introduced a further major policy change to New Zealand's accident compensation regime. The 1998 Act was driven by two desires, namely:
53.1 To introduce competition to aspects of ACC's business; and
53.2 To introduce insurance concepts and principles to the administration of the scheme.
The new Act:
53.3 Required all employers to purchase accident insurance for work related personal injuries suffered by their employees;
53.4 Enabled self employed persons to purchase accident insurance from insurers other than ACC for both work related personal injury and non work injury (other than motor vehicle injury);
53.5 Allowed insurance companies to compete to manage claims and underwrite accident insurance for all work related personal injury, and for non work injury (other than motor vehicle injury) to self employed persons.
54. The definition of cover for personal injury caused by a work related gradual process, disease, or infection was set out in s.33 Accident Insurance Act 1998. A material change between the 1992 and 1998 statutes concerning cover for personal injury caused by work related gradual process, disease, or infection was the abandonment of the requirement that the gradual process, disease, or infection "arise out of and in the course of employment" and the introduction of the requirement that a claimant's personal injury be caused by a "work related" gradual process, disease, or infection.
55. The term "work related personal injury" was defined in s.32 Accident Insurance Act 1998 to include personal injury of a kind described in Schedule 2 of that Act. Schedule 2 listed eleven diseases and toxic substances and corresponding occupations extracted from the International Labour Organisation (ILO) Convention 42. Those who suffered one of the Schedule 2 diseases and who had been employed in one of the corresponding trades, industries or processes listed in Schedule 2 were deemed to have suffered a "work related personal injury" unless an insurer established:
55.1 The claimant was not suffering from a personal injury of the kind described in Schedule 2; or
55.2 The claimant's personal injury was caused by factors other than their employment in one of the trades, industries or processes listed in Schedule 2 of the Act.
Injury, Prevention, Rehabilitation and Compensation Act 2001
56. The IPRC Act requires ACC's primary focus to be upon rehabilitating those who are injured by providing them with entitlements that restore, so far as is practicable, a claimant's health, independence and participation in society. The new legislation reintroduced lump sum payments for those who suffered permanent impairment.
57. The definition of personal injury caused by work related gradual process, disease, or infection found in s.30 of the IPRC Act is similar to that which could be found in s.32 and s.33 of the Accident Insurance Act 1998. The key changes between the two statutes are:
57.1 Schedule 2 Occupational Diseases have been extended to 17 diseases and conditions;
57.2 There is no longer a reference to corresponding trades, industries or processes in Schedule 2;
57.3 The presumption that a Schedule 2 disease is a work related gradual process, disease, or infection replaces the presumption in the 1998 Act that a Schedule 2 disease suffered by a person employed in one of the Schedule 2 occupations was a "work related personal injury".
[7] Report of the National Committee of Inquiry, Compensation and Rehabilitation in Australia, July 1974
[8] Law Commission Report No.4 1988
[9] Refer G W Palmer "What Happened to Woodhouse Report" [1981] NZLJ 561 in which it is said that only 17 of the 36 major policy recommendations in the Woodhouse Report were actually enacted.
[10] "Personal Injury - a Commentary on the report of the Royal Commission of Inquiry into Compensation for Personal Injury in New Zealand." (1969)
[11] Select Committee on Compensation for Personal Injury in New Zealand 1970
[14] cf Technical Information Circular 469 set out in full in Leitch v ACC [1990] NZAR 26
[15] Law Commission Report No.3 The Accident Compensation Scheme Interim Report on Funding.
[16] Law Commission Report No.4, Personal Injury, Prevention and Recovery [3rd Woodhouse Report]
[17] Report of the Royal Commission on Social Policy, Vol 2, Future Directions, April 1988
[18] C G Palmer "New Zealand's Accident compensation Scheme; Twenty Years On" (1994) 44 UTLR223
[19] Hon D F Caygill, Minister of Finance, 1989, Budget and Tables B6 p.13 - House of Representatives 27 July 1989
[20] Statement from the Minister of Labour, Accident Compensation Corporation Annual Report (1991) p.3
[21] Report of a Ministerial Working Party on the Accident Compensation Corporation Incapacity (1991); Report of a Ministerial Working Party on Accident Compensation and Incapacity (first supplementary report) (1991); and "Accident Compensation - A Fairer Scheme" 30 July 1991
[22] Section 3 Accident Rehabilitation Compensation Insurance Act 1992
[23] Sections 4 and 8 Accident Rehabilitation Compensation Insurance Act 1992
[24] Section 7 Accident Rehabilitation Compensation Insurance Act 1992
[25] S.8 Accident Rehabilitation Compensation Insurance Act 1992