6. What is compensation?
6.1 Definition of compensation
Compensation is defined in section 11 of the NDIS Act as follows:
- In this Act:
- compensation means a payment (with or without admission of liability) in respect of:
- compensation or damages in respect of personal injury; or
- personal injury, under a scheme of insurance or compensation under a Commonwealth, State or Territory law, including a payment under a contract entered into under such a scheme, or
- personal injury, in settlement of a claim for damages or a claim under such an insurance scheme; that is wholly or partly in respect of the cost of supports that may be provided to a participant (whether or not specifically identified as such). It does not matter whether the payment is made directly to the person who sustained the personal injury or to another person in respect of that person.
- A payment referred to in subsection (1) may be:
- in the form of a lump sum or in the form of a series of periodic payments, and
- made within or outside Australia.
A person may be injured in various ways that may result in the person receiving compensation. Examples are work injuries (where workers’ compensation is usually available), motor vehicle accidents (where an insurer may be liable to compensate an injured person), an injury caused by a fall in a public place (where an insurer under a public liability insurance policy may be liable to pay compensation) and medical negligence.
6.2 Forms of compensation awards
A compensation award can take a number of forms. These include a lump sum payment or a structured settlement resulting in periodic payments made on a regular basis. The award may be made as a result of court action, although states and territories have been trying to limit access to courts because of the expense and delay involved in litigation. Compensation can be paid on a periodic basis either following a court action or as a result of an application made to a state scheme such as Victoria’s Transport Accident Scheme.
6.3 Amounts paid from a personal insurance policy
Amounts paid to a participant or prospective participant from a personal insurance policy taken out for the benefit of that person are not taken into account as compensation for the purposes of the NDIS Act. These policies cover people for such matters as loss of income when the person loses a job, outstanding credit card or other debts when a person dies, becomes ill or is unemployed. They can also be in the form of health or accident insurance payments.
The common factor in all of these is that there is no party involved other than the participant or prospective participant and the insurance company.
6.4 NDIS component
The NDIS component of an amount of compensation under a judgement means the component that relates to the provision of supports of a kind that may be funded or provided under the NDIS after the date of judgement, and may include a component that consists of periodic payments.