What are deductions in a compensation claim?
During a settlement conference, your solicitor might tell you that the other party has made an offer of settlement of $150,000.00 all inclusive and that if you accepted that offer you would receive $85,000.00 clear in your pocket, after deductions.
So what is meant by the terms “all inclusive” and “after deductions”?
An all-inclusive settlement is a settlement which combines both the amount of damages that the plaintiff is being awarded, and the defendant’s share of the plaintiff’s legal costs.
So, using the above example, the offer of $150,000.00 all inclusive might simply mean that the defendant is offering that your damages (i.e. Compensation) is $120,000.00 and that they will contribute $30,000.00 towards your legal costs.
In the above example, if the offer of $150,000.00 all inclusive leaves the client with $85,000.00 clear, then this means that there are $65,000.00 worth of deductions; quite literally, $65,000.00 to come out of the agreed settlement figure.The deductions themselves can vary from case to case, but will usually include one or more of the following:
- Your solicitor’s legal costs – that is, the amount you will be paying your solicitor for their assistance with your case;
- GST on legal costs – an additional 10% on top of your solicitor’s legal costs which your solicitor is obliged to send to the Government;
- Disbursements – the amount of money your solicitor has spent preparing your case. This might include the cost of expert medical and liability reports;
- Barrister’s costs – If your case needed a barrister, the costs payable to him or her;
- Refund to Medicare – Almost all injured people are required to refund a certain amount to Medicare at the end of their case;
- Refund to Private Health Insurer – If your private health insurer has paid for some of your treatment expenses, you will need to refund that amount to the insurer at the end of your case;
- Refund to Centrelink – If you have received certain benefits from Centrelink since the accident, these might need to be repaid;
- Refunds to the defendant for expenses paid during the life of the claim – For example, in a motor accident claim the insurance company might have paid for a lot of your medical treatment whilst the claim was ongoing. The sum paid by the insurer is claimed as part of the ‘’all inclusive” figure but the insurer is entitled to a credit for those payments, so it must form part of the deductions; and
- Refunds to the defendant for advance payments – if you have requested and received an advance payment, for example if you are suffering financial hardship, these payments must be deducted from the ‘all inclusive’ settlement figure at the end of the case.
This is not an exhaustive list but these are the most common deductions.
To prepare for a settlement conference, your solicitor will prepare a ‘Schedule of Deductions’ so that during the conference they can advise you, with each offer made or received, exactly how much you’d walk away with after you’ve paid your legal team and arranged any refunds.
It’s important to give your solicitor accurate information about Centrelink and your Private Health Insurance so that they can make sure the deductions have been calculated accurately.
Keeping track of the deductions is one of the many complexities our expert compensation specialists at Stacks Goudkamp can assist you with. If you or someone you care about has been injured in an accident, you may be entitled to compensation. To arrange a free, no-obligation assessment of your claim, please call Stacks Goudkamp on 1800 25 1800, or alternatively, make an online enquiry.
Written by Brett Watts.