“What is my claim worth?” A look at how compensation is calculated under the TAC legal framework
Our clients will inevitably ask a variation of the above question.
How much money can I claim? How much compensation will I get for my injuries? What is the value of my injury?
The answer has both a theoretical base and a practical application.
Assigning a dollar value to a person’s pain and suffering is an imperfect practice. Decisions regarding compensation must be guided by a legal framework which offers certainty and consistency across different matters.
The TAC Scheme
All road users in Victoria are afforded the same rights to recover compensation under the Transport Accident Act 1986 (Vic) (“the Act”).
This important piece of legislation establishes the Transport Accident Commission (TAC) as the body responsible for managing the transport accident compensation scheme in Victoria.
Part of the cost paid to register a vehicle in Victoria goes toward the Transport Accident Fund. Think of this as an insurance premium paid by every driver to be covered for personal injury on our roads.
It’s for this reason that the TAC was established – to provide more assurance to road users who are inherently vulnerable to suffering damages.
From this starting point, certain benefits are guaranteed to all road users in Victoria – regardless of accident fault. These include entitlements to medical and like expenses to help pay for treatment; and loss of earnings payments to help cover a worker’s income in those critical months post-accident.
Above and beyond this, you may recover a small lump sum (known as an impairment benefit) where you meet the impairment criteria outlined in the Act.
The exact size of these payments is determined by a formula which depends on your degree of impairment as assessed by specialist doctors. For example, a 100 per cent impairment of your whole person – a very extreme rating that implies every assessable part of your body suffered maximum injury – will get you the maximum lump sum payment of $371,610.
The minimum impairment (which is required by law) to be entitled to a payment is 11 per cent of your whole person. The majority of Claimants will be assessed between 11 per cent and 30 per cent whole person impairment, with the latter figure representing the threshold for a deemed Serious Injury certificate.
Impairment benefit payments start from $8,140 and are capped at $371,610 (indexed annually from 1 July 2021).
The Common Law Sphere
Where clients can recover the highest amount of compensation is by suing for common law damages. These claims are limited to parties who can prove that their accident was the fault of another.
Above and beyond this requirement, they must also satisfy the TAC that they have suffered a serious injury.
If both these conditions are met, the Claimant is given the opportunity to conference with the TAC for the purposes of negotiating a “settlement amount”. This is the amount of compensation the Claimant is willing to accept to forever discharge the TAC from any future liability to pay compensation.
A settlement amount will be typically composed of two figures: an amount of compensation for the Claimant’s “pain and suffering”; and an amount of compensation for the Claimant’s “economic loss”.
These are referred to as the “two heads of damages” and are calculated as follows:
Pain and Suffering Damages
This is an amount of compensation paid in consideration for all of the consequences the accident has had on your life.
In that way, it is closely tied to your serious injury application (see How do I know if I’ve suffered a serious injury?) because your total tally of consequences helps inform how much compensation you can recover.
The amount is highly reliant on precedent, meaning that a comparison to similar injuries with similar consequences will attract similar compensation outcomes.
The minimum amount of pain and suffering damages the TAC will pay is $57,690 and the statutory maximum is $577,280 (as at 1 July 2021, indexed annually).
As mentioned above, a Claimant must satisfy the TAC that they have suffered a serious injury to even be considered for these payments – so they are reserved for those with serious and long-term consequences.
The maximum amount a Claimant with the severest of injuries (e.g., quadriplegia or acquired brain injury) can hope to receive is $577,280.
This may not seem like a lot of money – and certainly is not the kind of trade off Claimants would accept freely if they had the choice – but these maximums exist as a matter of policy in order to limit the liability of the TAC.
The Transport Accident Fund is a finite resource whose size is proportionate to the number of Victorian registered vehicles.
If Claimant’s could recover unlimited amounts, then the Fund may quickly lose capacity to service all of its intended benefits.
The second head of damages (which is entitled to workers only) relates to their economic (or pecuniary) loss.
It is more formulaic to calculate and involves a comparison between a Claimant’s pre-accident earnings (as evidenced by their tax returns) and their post-accident loss of earning capacity.
This difference is then projected into the future, over the remainder of the Claimant’s working life until retirement age, with reductions made for things like the vicissitudes of life and interest earnings on the lump sum at 6%.
The maximum amount of compensation a Claimant can receive for their economic loss is similarly capped at $1,298,980.
It is important to familiarise yourself with these figures if claiming compensation. Understanding how the framework is structured, and how compensation is calculated at the different levels, can help manage your expectations when it comes time to negotiating a settlement amount.
If you or someone you know has been injured on the road, our dedicated TAC team at Zaparas Lawyers will be able to guide your through your potential entitlements on a no-win, no fee basis. Contact our office today on (03) 8527 0200 today for your initial obligation-free appointment.