Team Leader - Claims
Chad has several years’ experience within the insurance industry. He practiced insurance litigation, for both defendant
and plaintiff law firms, for over 3 years and now has several years’ experience working with LGIS in insurance claims
management, having recently been promoted to the team leader of all public sector claims within LGIS.
This is a common question we’re asked when a local government is involved in litigation or court proceedings (being sued by a third party for compensation which is covered under the Scheme protection policy).
At first glance, it does seem contradictory. The lawyers representing your local government have advised the local government is unlikely to be liable for the claim and yet they recommend settling.
Such a recommendation is called making a “commercial” offer. The reasoning is exactly that – it makes more commercial sense to settle a claim (that is, pay the claimant) than it does to defend a claim all the way through the court process to the conclusion of a trial. This is essentially due to the legal costs involved in litigation.
It would be stating the obvious that the legal costs involved in defending a claim all the way through court to trial can be considerably costly, and while the successful party does receive part of their legal costs back from the unsuccessful party, they do not receive the full amount. A successful party will only get back what’s known as their “taxed” costs, which is usually between 65 – 75 per cent of their total costs.
Using the example, the Scheme would be $10,000 better off making a “commercial” offer than it would defending a claim all the way through to trial even though we might have a good chance at winning. This is the reason LGIS or the lawyers representing a local government may recommend making a commercial offer to the claimant early on in proceedings.
Of course, this is assessed on a case by case basis, and considering the context of the claim there may be reasons to defend a matter though to the conclusion of a trial.
Your local government is being sued by a claimant and court proceedings have started.
If LGIS pays for your local government to defend the claim all the way through to trial, it would cost approximately $100,000 in legal fees.
Even though your local government is not liable and is likely to win, you would only be able to recover $70,000 in legal costs from the other party (being 70 per cent of your total costs - your “taxed” costs).
This $30,000 is what’s known as “wasted legal costs” – costs that can never be recovered even if successful.
Therefore, even if LGIS and your local government win, you would be out of pocket $30,000 (being $100,000 of total legal costs less the “taxed” costs recovered $70,000).
Therefore, it’s a better commercial decision to offer the claimant $20,000 than it would to defend the claim all the way through to trial and “waste” $30,000.
If you have any questions regarding the liability claims process, or around why LGIS may seek to settle a claim, please contact the LGIS liability claims team on 9483 8888 or [email protected].
Congratulations to the Shire of Yilgarn who were award their Tier 3 Silver diligence in Safety Award. James Sheridan, CEO LGIS and Christ Gilmour, Risk Specialist – Regional visited the
Shire on Tuesday 26 February to meet the Yilgarn team and present the award.
In February this year the Australian Tax Office (ATO) made a private ruling on the following question: ‘Is the income compensation component of the redemption settlement payable under Workers Compensation and Injury Management Act 2023 (WA) included in your assessable income under section 6-5 of the Income Tax Assessment Act 1997 (Cth)?’ The ATO’s very short answer was ‘Yes’.
It’s a question very few people want to ask but given the current cyber risk landscape shows no signs of slowing, it’s likely an inevitable question for organisations, including local governments.
Each month we take your questions to one of our LGIS team members to answer.
If you want to submit a question for next issue, email us at [email protected].
Risk Matters – Autumn 2020 Almost overnight, thousands of Australian office workers went remote. However, LGIS members are in a position where a high number
Risk Matters – Autumn 2020 Why early intervention? Responding early can reduce the likelihood of a worker becoming ill or injured or taking long-term sick
Risk Matters – Autumn 2020 The City of Subiaco has recently had great results in transforming their safety culture through the PErforM program. The purpose
LGIS is the unifying name for the dedicated suite of risk financing and management services for WA local governments, established by the WA Local Government Association in conjunction with JLT Public Sector (part of the Marsh group of companies). LGIS is managed by JLT Public Sector (ABN 69 009 098 864 AFS Licence 226827).
Risk Matters, via this website, is designed to keep members, their staff and elected members informed on topical risk management and insurance issues and LGIS programs and services.
