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4.5.4 Where a person or a dependant recovers damages from a third party

This situation is similar to subsection 388(5) of MRCA, however the person is suing a third-party and not the Commonwealth. If a person institutes proceedings against a third party, subsection 401(2) defines what compensation is recovered and subsection 402(2) provides that compensation is no longer payable after a person successfully sues a third party and recovers damages.

The amount to be repaid is the lesser of the amount of compensation already paid to the person (in relation to that cause of action) and the amount of damages awarded. 

Section 5 of the MRCA defines “compensation” to include medical treatment provided under Chapter 6.  Accordingly subsections 401(2) and 402(2) preclude the plaintiff from receiving any compensation, including compensation for treatment provided under Chapter 6, and any treatment at the expense of the Department previously received is recoverable.

Impairment points are not considered ‘compensation’ under the MRCA.  The impairment points are the mechanism used to establish the amount of permanent impairment compensation payable. The GARP M is the guide which is prepared for the purpose of assessing impairment expressed as impairment points, and it makes no special provision for the assessment and combining of impairment points where there has been third party compensation received. Therefore the total permanent impairment points resulting from all compensable conditions should be calculated for threshold purposes only (including those which damages were received for) however the assessment of compensation payable should preclude any impairment for the same ‘cause of action’ for which damages were received.

Compensation for MRCA Supplement under section 221 or 245, bereavement payments under section 242 and 255 (where the deceased member of former member was in receipt of periodic payments for permanent impairment compensation), and section 253 (for weekly compensation to eligible young persons) continues after the date on which the damages are recovered by the person. Additionally, these payments are not included in the amount of compensation to be repaid under subsection 401(2).

Section 402 does not have the effect of ceasing liability under the MRCA for the same cause of action that is subject to a third party settlement. As such the compensable conditions (for which damages have been received) and their related impairment are still recognised under the MRCA. This will mean that impairment points for all the accepted conditions will count towards the eligibility for MRCA benefits, however the payment of compensation (including permanent impairment, incapacity payments and treatment) is precluded in respect of the condition covered in the award of damages.

Finding the ‘same cause of action’?

The same ‘cause of action’ requires not only a commonality of the compensable condition, but also a commonality of incident, that is the condition must arise out of the same inciting event as the condition/s which are accepted under MRCA.  

Medical opinion may be sought from the treating medical practitioner or from a contracted medical advisor to assess the compensable conditions under MRCA and what conditions have been included in the settlement awarded to the client by the third party.

Example of client's claims after receiving third party compensation

Permanent Impairment Compensation

A client requests to be assessed for permanent impairment (PI) compensation under MRCA, the client has a number of accepted service-related conditions, where two conditions were caused by a motor vehicle accident. The client has also received a third-party settlement with respect of the motor vehicle accident. Therefore the impairment with respect of the same cause of action (injuries and associated impairment as a result of the accident) is not compensable under MRCA should not be included for the purposes of calculating the PI compensation.

Where third party damages are received it must be clarified that impairment points are not compensation and are not recoverable pursuant to section 401. Therefore the overall impairment points rating for all compensable conditions should be assessed and awarded for other thresholds and benefits under the MRCA. See 12.7.2 for more information about the relevant thresholds for other benefits. That is, if the impairment rating for all compensable conditions (including those subject to the common law action) reach the required threshold for SRDP (50 impairment points) or the Gold Card (60 impairment points) the client will be entitled to receive the benefit. However the use of the DVA Gold Card is not to be used to obtain treatment for the conditions which have been compensated for by the third party. See below for information about treatment.

Incapacity Payments

The same client submits a claim for incapacity payments under MRCA as they are currently unfit for work due to their accepted conditions. The client's ongoing incapacity for work is due to two of their accepted service-related codntiions, and on of the conditions is related to the motor vehicle accident, and the other is a psychological injury relating to their service. As this client has received a third party settlement with respect of the motor vehicle accident, the client will either be:

  • Eligible for incapacity payments - where the psychological injury was the condition which first caused the incapacity for work, and medical certification is provided that confirms the client is still unfit for work as a result of this condition. Although the condition caused by the motor vehicle accident causes an incapacity; the client was first incapacitated for a separate cause of action and therefore the third party settlement will not preclude the client from receiving incapacity benefits.
  • Ineligible for incapacity payments - if the injury caused by the motor vehicle accident continues to, and is the condition which first led to the client's incapacity for work. Only if the motor vehicle injury resolves and ceases to be the reasons the client is unfit for work, will the client be eligible to receive incapacity payments if the psychological injury still causes an incapacity for work.

The person would be precluded from receiving treatment using their DVA Health Care Card for the two motor vehicle injuries. Where the client has an overall impairment point rating assessed as part of the Permanent Impairment compensation claim, if they reach the threshold for a Gold Card (i.e. 60 points overall for all compensable conditions) the impairment points continue to apply and the client will be entitled to receive the Gold Card, however is precluded from obtaining treatment with respect of the conditions for which the damages were received. Similarly if the client already has a Gold Card prior to the third party settlement, they will not lose entitlement to the card as impairment points are not considered compensation that is recoverable pursuant to section 401.

A Delegate should ensure there are notes relating to the settlement and conditions which are precluded from compensation under MRCA on the client’s file for ongoing management of the client’s benefits and future claims.

The client however would continue to be entitled to receive the MRCA supplement.

Settlement reached without admission of liability

Where a settlement payment has resolved a claim and liability has not been admitted as part of the settlement, offsetting and compensation recovery provisions across the three Acts will still apply.

Provided that an employee recovered an amount for an incapacity/injury/cause of action under a settlement arrangement, we do not consider the terms on which the settlement is prepared, including whether or not there is an admission of liability will impact on the application of the relevant sections of the VEA, MRCA or DRCA. Further, neither the VEA, MRCA or DRCA require an admission of liability in order to take an amount paid into account in relation to the application of the relevant offsetting/compensation reduction provisions. In relation to VEA specifically, the VEA regards a compromise or settlement of a claim for damages to be compensation (see s30B(c) of the VEA).

It can be difficult to ascertain the specific incapacitates that are referrable to a vaguely-worded settlement deed, but where claims for damages have been made at common law, we would expect:

  • The relevant incapacities to be described in a Statement of Claim prepared to commence court proceedings; or
  • If a matter was to settle before a Statement of Claim was issued, the relevant details to be described in correspondence provided by the claimant in order to justify the payment of a settlement sum.