Skip Ribbon Commands
Skip to main content

Public Liability

Public Liability

Advice on legislation or legal policy issues contained in this paper is provided for use in parliamentary debate and for related parliamentary purposes. This paper is not professional legal opinion.
Briefing Paper No. 07/2002 by Roza Lozusic

There has been a high level of concern expressed over public liability insurance premiums in the past few months. It has been reported that there have been premium rises of up to 400% and higher in some areas, with sporting and community groups, and businesses which offer adventure tourism, being particularly affected. It has also been reported that the flow on effects of such increases have been disastrous for such groups who have curtailed activities or ceased operating altogether.

There have been numerous calls for reform, from Members of Parliament, community groups and media commentators.

The result of the increasing pressure to put in place reforms to alleviate spiralling premiums has been: a national ministerial meeting, convened by the Federal Minister for Revenue and Assistant Treasurer Senator Helen Coonan, which was held on 27 March 2002 to investigate causes and possible solutions to the present situation; an agreement to meet again in May 2002; an announcement of a Senate Inquiry into the Impact of Public Liability and Professional Indemnity Insurance Cost Increases. The NSW Premier, Bob Carr, has also announced a range of measures to tackle the problem.

Following the national ministerial meeting on 27 March 2002, there has been a strengthening of the debate by key stakeholders about the precise causes of the premium increases. Whilst there is agreement that premium increases have occurred and this is impacting heavily on the community, particularly sporting groups and not-for-profit community organisations, there is considerable disagreement by the key stakeholders over the exact causes of premium increases and therefore a difference of opinion over what form reform should take.

The debate has centred on whether or not insurers have been 'unfairly' raising premiums due to poor investment returns coupled with underpricing of premiums or whether in fact there has been a rise in claims, or rise in the cost of claims, and a litigation explosion which has led to the current crisis.

There are many complex factors given as causes to the current situation. Key stakeholders disagree or emphasise certain factors as being more significant or central than others.

A key concern that has emerged in the debate is that any proposals for reform should bear in mind that the key causes have yet to be explored in full or are hotly contested. In particular, it has been argued that major changes to the tort law system, including changes to the definition of negligence, should not be made without exploring such causes in full.

Section 1 outlines what public liability is and looks at the common law of negligence. It also looks at negligence in the context of sport, local councils and community organisations. (pp 4-8)

Section 2 briefly explains public liability insurance, what it is, what it covers. It also gives a brief overview of the general insurance industry and its profitability and factors which will effect or impact on the profitability of insurance companies, such as reinsurance costs. It more also looks at the factors which have contributed to the increase in public liability insurance premiums and outlines the competing views of key stakeholders in this area. It then explores in more detail the competing arguments with respect to the key factors raised by the stakeholders. (pp 8-26)

Section 3 looks at reform possibilities. (pp 26-29)