A commutation is an agreement between an injured worker and the workers compensation insurer whereby the insurer effectively ‘buys out’ the worker’s future claim entitlements in a lump sum payment.
A commutation generally removes the insurer’s liability to fund all future weekly wage benefits and future medical, hospital and rehabilitation expenses but offers the injured worker a one-off, lump sum payout.
Eligibility for a Workers Compensation Commutation in NSW
A commutation is subject to approval by the State Insurance Regulatory Authority (“SIRA”).
The SIRA website lists the following conditions as prerequisites for a commutation:
- You have an injury that has resulted in permanent impairment of at least 15%
- Compensation for permanent impairment has been paid
- It has been more than 2 years since you first received weekly payments for the injury
- All opportunities for injury management and return to work have been fully exhausted
- You have received weekly payments regularly in the previous 6 months
- You have an existing and continuing entitlement to ongoing weekly payments
- Weekly payments have not been terminated as a result of you not complying with any return to work obligations
- You do not have a ‘catastrophic injury’ as described in Part 9 of the workers compensation guidelines.
Catastrophic Injuries and Commutations
A worker may have suffered a ‘catastrophic injury’ if they have suffered one or more of the following types of injury:
- Spinal cord injury
- Brain injury
- Amputation
- Burns
- Permanent blindness
To determine whether a worker has suffered a catastrophic injury, the worker ought to be assessed by a suitably qualified medical examiner who is familiar with the NSW Workers Compensation Guidelines.
Workers who have suffered a catastrophic injury are unable to commute their future medical, hospital and rehabilitation claim entitlements. They can however still commute their future weekly wage benefits.
Negotiating a Commutation Agreement with the Insurer
It is important to realise up front that insurers are reluctant to pay the maximum value of a worker’s future claim entitlements in a commutation.
For a commutation to be commercially attractive to an insurer, the insurer will expect the agreed commutation amount to reflect a discount on their future liability for the claim. Otherwise, there is little financial value for the insurer to agree to pay the injured worker a lump sum payment when compared to forcing that worker to remain on weekly benefits.
With that said, a commutation offers an injured worker a way out of the NSW workers compensation scheme and the hassle that comes with it. Commuting your claim means no more monthly appointments with the GP to obtain a medical certificate, no more waiting for the insurer to approve funding requests, and no more case conferences or treatment reviews with the insurer’s rehabilitation providers.
Get Expert Legal Advice Before Commuting Your Claim
All injured workers are strongly encouraged to seek legal advice prior to entering negotiations with the insurer about a commutation. In fact, a worker must receive independent legal advice before entering into a commutation agreement so it is best to get an experienced workers compensation lawyer involved as early as possible.
The legal advisor is required to certify that certain advice has been provided and that the worker understands the implications of the commutation agreement.
The final step in the process involves registering the commutation agreement with the Personal Injury Commission. Once the Commission has registered the agreement, the insurer will pay the worker the agreed amount.
Call us today at 1800 314 761 for expert legal advice on your workers compensation commutation claim.