Road and Traffic Accidents

How is Car Accident Compensation Calculated?

Everyday, there are motor vehicle accidents occurring on our roads. For those suffering from personal injury, specifically from car accidents, there are car accident claims available to deal with the physical and financial burdens during this time of need. But how is a car accident compensation claim calculated in such circumstances? Read on to find out more what the key areas affecting a compensation payout.

Purpose of compensation

The purpose of compensation or accident claims is to put the injured party back to the position they would have been in had they not been in a car accident. Therefore, how much compensation is paid out in a car compensation claim will vary between cases and ultimately depends on the injured party’s individual circumstances.  All car drivers are required to have Compulsory Third Party (CTP) insurance and so if the injured party’s car accident claim is successful, compensation will be paid by the insurer or the negligent car driver or owner.

Types of compensation

The injured party may receive compensation for:

  • Past and future medical expenses
  • Cost of care (domestic assistance) provided by a professional, or by friends and family
  • Loss of past and future earnings (lost wages)
  • Pain, suffering and loss of enjoyment of life

Medical Expenses

The injured party can be reimbursed for past medical expenses that arose because of the road accident. Compensation for future medical expenses must be discounted by 5%, as per the Motor Accident Compensation Act 1999.

If, due to your injury, you have received any government benefits relating to medical expenses, (such as Centrelink) these benefits must be repaid from a compensation payout. Also, any medical expenses that were paid for by your private health insurer must also be repaid out of the compensation.

Cost of care (Domestic assistance)

Compensation for attendant care provided by friends and family (known as gratuitous care) can be awarded regardless of whether it was covered by insurance or not. However, compensation in this area is subject to restrictions. Firstly, it must be shown that there was a reasonable need for the gratuitous care, solely due to the injury. Secondly, as per the Motor Accident Compensation Act 1999, the gratuitous care must have been given for more than six hours per week, for a period longer than six consecutive months.

For commercially paid for care, it must only be established that the need for care arose solely because of the injury and that the amount sought is reasonable.



Loss of earnings

Compensation for the loss of past or future earnings is restricted. The Motor Accident Compensation Act 1999, limits the compensation payout, stating that any amount by which the injured party’s gross weekly earnings exceeds three times the average weekly earnings of all NSW employees in the most recent quarter must be disregarded. Compensation for loss of future earnings must also be discounted by 5%, if paid in a lump sum.

Pain and suffering

To be eligible for pain and suffering compensation, there are injury thresholds that must be met. This threshold is measured as a percentage of a whole person impairment. The requirement is that the personal injury sustained must result in a permanent impairment of at least 15%. This will be assessed by medical professionals, who are under strict guidelines. Therefore, only those injuries which significantly impact a person’s health status are eligible for compensation.

Unfortunately, this means that some injuries, while significantly impacting the injured party, may not qualify for compensation. Injuries such as loss of fingers or toes, scarring or loss of taste often do not meet the threshold.

The Motor Accident Compensation Act 1999, has placed monetary caps on compensation for pain and suffering, stating that compensation cannot exceed $350,000, subject to indexation and that interest is not recoverable.

Contributory negligence

The size of the compensation claim amount  you may receive will also depend upon who the negligent party is. The other party may argue a defence of contributory negligence. Contributory negligence occurs when one’s own negligence has contributed to the causation of their injury, due to a failure to take reasonable care. If this is the case, responsibility for the injury will be apportioned between the parties and compensation will be reduced accordingly.

If the road accident was partly your fault, the compensation you may receive will be less than the amount you would receive if you were not at fault at all. The compensation is usually reduced by the percentage of which you contributed to the accident. Being partly fault can include circumstances such as:

  • Driving at an unsafe speed
  • Failing to wear a seat belt
  • Driving under the influence of alcohol
  • Driving under the influence of drugs
  • Travelling in a car where you were aware the driver was under the influence of alcohol or drugs

Lump sum payouts

Compensation is most commonly paid out in a lump sum. However, sometimes inaccurate predictions about the long-term nature of the injuries can leave injured parties finding that this payout fails to meet their long-term needs. Therefore, it is best to seek legal advice from car accident lawyers in order to receive an appropriate compensation claim amount.

For more information about a motor vehicle personal injury claim, contact our accident lawyers Schreuder Partners today.

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