Child Sexual Abuse: all states now on board for National Redress Scheme due to start on 1 July 2018

Key Points
  • All  States and Territories have committed to the National Redress Scheme
  • New South Wales and Victoria are the first States to pass legislation implementing the National Redress Scheme for Institutional Child Sexual Abuse
  • Will insurers of institutions interpret payments made under the Scheme as compensation for injury suffered or as a recognition payment?

In June 2018, the Commonwealth Redress Scheme for Institutional Child Sexual Abuse Bill 2017 (“the Bill”) was passed, establishing the National Redress Scheme for Institutional Child Sexual Abuse (“the Scheme”). New South Wales and Victoria are the first States to have introduced legislation implementing the Scheme, which will apply to all State run institutions and other non-government institutions that opt into the Scheme.

The Scheme will provide support to people who were sexually abused as children whilst in the care of an institution. The Scheme is to begin on 1 July 2018 and will run for 10 years. The Scheme can provide the following:
  1. access to psychological and counseling services;
  2. a direct personal response from the responsible institution; and
  3. a redress payment capped at $150,000 as a recognition of the wrong the person has suffered.
The Scheme is an alternative to obtaining compensation through the common law court system; that is, a survivor can receive compensation under one system only, but not both. Applications for compensation will be independently assessed and prior to the acceptance of any offer made; survivors will be able to access free independent legal advice funded by the Scheme. The Turnbull Government has committed funding of $37.9 million over three years for legal services to survivors.  

The funding will be provided to ‘knowmore’ a legal advice service provider who will help survivors access redress options including claims under the Redress Scheme, access to compensation through other schemes or common law rights and claims.  Advice will also be provided on key steps in the redress process.
Survivors who have accessed redress under another scheme or received compensation through a settlement or by judgment of a court will not be excluded from applying for redress under the Scheme. Any prior payments made by a participating institution in relation to the abuse suffered will be deducted from the amount payable by that participating institution.

The Scheme relies on States passing legislation to join however so far only NSW and Victoria have introduced implementing legislation. The New South Wales Bill received assent on 23 May 2018 and became the National Redress Scheme for Institutional Child Sexual Abuse (Commonwealth Powers) Act 2018 (NSW) (“the NSW Act”) and the Victorian Act received assent on 13 June 2018. It is estimated that around 15,000 people who were sexually abused as children while in care of  New South Wales, Victorian and Commonwealth government institutions will be eligible for redress under the Scheme when it starts.

If non-government institutions such as churches and charities in NSW and Victoria opt-in to the Scheme, an estimated 60,000 people who have been abused in Australian institutions will be eligible.

Five major non-government institutions have agreed to join the Scheme and provide redress to people sexually abused in their care, including the Catholic Church, the Anglican Church, Salvation Army, Scouts Australia, the YMCA and the Uniting Church.  

Whilst the number of non-government institutions opting-in to the Scheme is increasing, it is important to remember that the Scheme as it currently stands is inconsistent with some recommendations of the Royal Commission including:
  • the lower monetary cap on the redress payout; and
  • the restrictive eligibility criteria imposed.

NSW Attorney-General Mark Speakman declared the passage of the Bill in May as “a milestone for those who suffered sexual abuse as children in institutional settings” and defended the lower cap, stating that it would result in an average payment to survivors of $76,000 which is $11,000 more than the average of $65,000 recommended by the Royal Commission.

The Scheme has also been criticised as it is believed that the eligibility requirements will restrict access to justice for many survivors. For example, as the Scheme is only available to Australian citizens and permanent residents, those abused in immigration detention centres will be unable to access the Scheme. Additionally, survivors who have gone on to commit sex offences themselves or have been sentenced to imprisonment for five years or more for serious offences are excluded from the Scheme.

Implications for insurers

It remains to be seen how the Scheme will affect insurers’ liability to indemnify institutions responsible for sexual abuse, as the Scheme describes a redress payment as a “recognition payment” and not as a compensation payment in the traditional sense.

Recommendation 15 of the Royal Commission’s Redress and Civil Litigation Report (2015) states: “The purpose of a monetary payment under redress should be to provide a tangible recognition of the seriousness of the hurt and injury suffered by a survivor” (our emphasis). We note that words such as “compensation” and “damages”, which are typical of insurance policies, seem to have been deliberately omitted from the recommendation, thus raising the question as to whether payment for recognition will fall within the ambit of most policies.

Recommendation 15 is echoed in the wording of the Bill whereby it provides that despite any other law, a redress payment is not to be treated as being a payment of compensation or damages. The Prime Minister and the Minister for Social Services confirmed this in a May 2018 media release:
“Redress is not compensation, however it will acknowledge the hurt and harm suffered by the individual and ensure institutions take responsibility for the abuse that occurred on their watch, by their people.”

Interestingly, both the NSW and Victorian Acts state that a redress payment is a payment of compensation under the Scheme. However, in order to prevent a redress payment from affecting other payments which a person may be legally entitled to (such as a social security payment), the redress payment is not to be treated as being a payment of compensation or damages. Section 49 also provides a carve out for insurance contracts, providing that: “nothing in this Act prevents a liability insurance contract from treating a redress payment as being a payment of compensation or damages.”

Key tasks for insurers to consider before 1 July 2018:

  • Reconcile the additional risk of liability under the Scheme with their existing insureds and insurance products; and
  • Consider whether redress payments ought to be defined as something other than ‘compensation’ or ‘damages’ in their insurance products.

Post by Ashleigh Gambera and Freida Stylianou

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