Compensation - NDIA may recover compensation directly from defendant or insurer

10. NDIA may recover compensation directly from defendant or insurer

When a participant, or prospective participant, has made a claim for compensation against another person or an insurer, the NDIA may issue a preliminary notice or a recovery notice to the person or insurer.

A preliminary notice puts an insurer or defendant on notice that the NDIA may wish to recover an amount from the person or insurer. A recovery notice requires an insurer or defendant to pay compensation directly to the NDIA.

10.1 The NDIA may issue a preliminary notice

The NDIA may issue a preliminary notice to a defendant or an insurer in the following circumstances.

10.1.1 When can the NDIA issue a preliminary notice to a person other than an insurer?

The NDIA may issue a written notice (a preliminary notice) to another person (the potential compensation payer) if:

  • a participant or prospective participant makes a claim against the potential compensation payer for compensation; and
  • the claim relates to the participant's or prospective participant's impairment.

If these criteria are met, the NDIA may issue a preliminary notice to the potential compensation payer stating that the NDIA may wish to recover an amount from the potential compensation payer (section 109(1)).

10.1.2 When can the NDIA issue a preliminary notice to an insurer?

The NDIA may issue a written notice (a preliminary notice) to an insurer if:

  • a participant or prospective participant makes a claim against another person (the potential compensation payer) for compensation;
  • the claim relates to the participant's or prospective participant's impairment; and
  • an insurer may be liable, under a contract of insurance, to indemnify the potential compensation payer against any liability arising from the claim for compensation.

If these criteria are satisfied, the NDIA may issue a preliminary notice to the insurer stating that the NDIA may wish to recover an amount from the insurer (section 109(2)).

10.1.3 What must a preliminary notice contain?

A preliminary notice must contain:

  • a statement of the person's obligation to notify NDIA of liability to pay compensation; and
  • a statement of the effect of a preliminary notice so far as it relates to the notice.

10.1.4 The person's obligation to notify NDIA of liability to pay compensation

Upon receiving a preliminary notice, the person or insurer is required to notify the NDIA in writing of their liability to pay compensation:

  • if the person or insurer was liable to pay compensation when they received the notice – within 7 days of receiving the notice; or
  • if the person or insurer becomes liable to pay compensation after they receive the notice – within 7 days of becoming liable to pay compensation (section 110).

The person or insurer commits an offence if they do not comply with this requirement (section 110). The offence is punishable by 12 months imprisonment or a fine of 60 penalty units, which in 2016 totals $10,800.

10.2 The NDIA may issue a recovery notice

Generally, a preliminary notice will be issued by the NDIA before it issues a recovery notice. However, the NDIS Act does not require that to be done and there may be circumstances that warrant a recovery notice being issued without a preliminary notice having previously been issued.

The NDIA may issue a recovery notice to a defendant or an insurer in the following circumstances.

10.2.1 When can the NDIA issue a recovery notice to a person other than an insurer?

The NDIA may issue a written notice (a recovery notice) to another person (the compensation payer) if the following criteria are met:

  • one or more NDIS amounts (External website) (external) have been paid to a person in respect of a participant's impairment; and
  • the compensation payer either:
  1. is liable to pay compensation to the participant in relation to the impairment; or
  2. if the compensation payer is a state or territory authority – has determined that a payment by way of compensation is to be made to the participant in relation to the impairment (section 111(1)).

If these criteria are met, the NDIA may issue a recovery notice to the compensation payer setting out the amount the NDIA proposes to recover from the compensation payer.

10.2.2 When can the NDIA issue a recovery notice to an insurer?

The NDIA may issue a written notice (a recovery notice) to an insurer if the following criteria are met:

  • one or more NDIS amounts (External website) have been paid to a person in respect of a participant's impairment; and
  • an insurer is liable, under a contract of insurance, to indemnify the person against whom the participant, or prospective participant, has made a claim for any liability arising from a claim for compensation (section 111(2)).

If these criteria are met, the NDIA may issue a recovery notice to the insurer setting out the amount the NDIA proposes to recover from the insurer.

10.2.3 What amount must be specified in a recovery notice?

The amount to be specified in the recovery notice is the lesser of the following (section 111(4)):

  • an amount equal to the sum of the NDIS amounts (External website) that have been paid to any person in respect of the participant's impairment; or
  • if before the notice was issued, the participant's claim has led to a judgement by a court (whether by consent or not) or to a settlement – an amount equal to the recoverable amount worked out under:
  1. Amount payable to NDIA where participant receives compensation from a judgement (other than a consent judgement) ; or
  2. Amount payable to NDIA where participant receives compensation from a consent judgement or settlement (as applicable).

10.2.4 What must a recovery notice contain?

A recovery notice must contain a statement of the matters outlined below under the heading it is an offence to pay compensation to the participant after receiving a preliminary notice or recovery notice.

10.3 The effect of a preliminary notice and recovery notice

10.3.1 A preliminary notice or recovery notice suspends the person's liability to pay the compensation or indemnity to any person other than the NDIA

If a preliminary notice or recovery notice has been issued, the person or insurer who received the notice is not liable to pay the compensation or indemnity to any person other than the NDIA while the notice is in effect (section 112).

10.3.2 A recovery notice renders the compensation payer or insurer liable to pay the NDIA

If a compensation payer is given a recovery notice, the compensation payer is liable to pay the NDIA the amount specified in the notice and the specified amount becomes a debt due to the NDIA (sections 111(3) and 111(7)).

If an insurer is given a recovery notice, the insurer is liable to pay the NDIA the amount specified in the notice and the specified amount becomes a debt due to the NDIA (sections 111(3) and 111(7)).

10.3.3 It is an offence to pay compensation to the participant after receiving a preliminary notice or recovery notice

The person or insurer commits an offence if they pay compensation to the participant after receiving a preliminary notice or recovery notice, unless (section 114):

  • the NDIA has revoked the preliminary notice in writing;
  • the person or insurer has paid the NDIA the amount specified in a recovery notice; or
  • the NDIA has given the person or insurer written permission to pay the amount to the participant.

The offence is punishable by 12 months imprisonment or a fine of 60 penalty units.

If a person or insurer is convicted of an offence, the person or insurer is also liable to pay to the NDIA an amount determined by the NDIA. The amount determined by the NDIA must not be more than the amount that would have been specified under a recovery notice if one had been issued (section 115).

10.3.4 Payment to the NDIA discharges the person's liability

When a person or insurer pays the NDIA after receiving a recovery notice, the payment discharges (s.113):

  • the insurer's liability to the indemnified person (if applicable);
  • the person's liability to the participant; and
  • the participant's liability to the NDIA.

10.3.5 A decision to issue a recovery notice is a reviewable decision

A decision to issue a recovery notice can be reviewed and is known as a reviewable decision (section 99(p)).

The NDIA must notify the person in writing of a decision to issue a recovery notice, including a statement to the effect that the person may request that the NDIA review the decision (section 100(1)).

This page current as of
1 April 2019