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Midwife Professional Indemnity (Commonwealth Contribution) Scheme Bill 2010

Part 3 Run-off cover Commonwealth contributions

Division 1 Introduction

29   Guide to run-off cover Commonwealth contributions

             (1)  This Part provides that a run-off cover Commonwealth contribution may be paid in relation to a liability of an eligible midwife if the liability relates to an eligible run-off claim.

             (2)  The following table tells you where to find the provisions dealing with various issues:

 

Where to find the provisions on various issues

Item

Issue

Provisions

1

what is an eligible run-off claim?

section 31

2

when is a run-off cover Commonwealth contribution payable in respect of a liability?

sections 32 to 34

3

why are apportionment certificates relevant?

paragraph 32(1)(c)

4

how are applications for apportionment certificates made and decided?

sections 51 to 57

5

what is the amount of a Commonwealth run-off cover contribution?

section 35

6

what if a payment is received that would have reduced the amount of an insurance payment?

sections 36 to 40

7

what is the effect of setting a run-off cover termination date?

sections 41 to 45

8

notifying the Medicare Australia CEO if a person ceases to be covered

section 46

9

invoices for midwife professional indemnity cover

section 47

10

reports on run-off cover Commonwealth contributions

section 48

11

modifications and exclusions by Rules

section 49

12

how does a person apply for a run-off cover Commonwealth contribution?

section 58

13

when will a run-off cover Commonwealth contribution be paid?

section 61

14

what information has to be given to the Medicare Australia CEO?

section 62

15

what records must be kept in relation to run-off cover Commonwealth contribution matters?

section 63

16

how are overpayments of run-off cover Commonwealth contribution recovered?

sections 64 and 65

31   Eligible run-off claims

             (1)  A claim is an eligible run-off claim if:

                     (a)  it is a claim made against a person who, at the time the claim is made, is a person to whom subsection (2) applies; and

                     (b)  it relates to an incident that occurred on or after 1 July 2010 and on or before the run-off cover termination date in the course of, or in connection with, the person’s practice as an eligible midwife; and

                     (c)  if there is a run-off cover termination date, the person:

                              (i)  was, immediately before the run-off cover termination date, a person to whom subsection (2) applies; and

                             (ii)  continued to be such a person for the whole of the period between the run-off cover termination date and the time when an eligible insurer was first notified of the claim, or of facts that might give rise to the claim; and

                     (d)  the person has midwife professional indemnity run-off cover that indemnifies the person in relation to the claim.

             (2)  This subsection applies to a person who is one or more of the following:

                     (a)  a person aged 65 years or over who has retired permanently from private practice as an eligible midwife;

                     (b)  a person who has not engaged in private practice as an eligible midwife at any time during the preceding period of 3 years;

                     (c)  a person who has ceased (temporarily or permanently) the person’s practice as an eligible midwife because of maternity (see subsection (3));

                     (d)  a person who has ceased the person’s practice as an eligible midwife because of permanent disability (see subsection (4));

                     (e)  a person who is the legal personal representative of a deceased person who had been an eligible midwife;

                      (f)  a person who is included in a class of persons that the Rules specify as persons to whom this subsection applies.

However, a person is not a person to whom this subsection applies if the person is included in a class of persons that the Rules specify as a class of persons to whom this subsection does not apply.

             (3)  A person is taken, for the purposes of paragraph (2)(c), to have ceased the person’s practice as an eligible midwife because of maternity if and only if:

                     (a)  the person:

                              (i)  is pregnant; or

                             (ii)  has given birth; or

                            (iii)  is recovering from a pregnancy (including a miscarriage or a stillbirth); and

                     (b)  another person who is a medical practitioner has certified, in the form approved by the Medicare Australia CEO, that the person is pregnant, has given birth or is recovering from a pregnancy, as the case requires; and

                     (c)  the person has ceased all practice as an eligible midwife:

                              (i)  because she is pregnant; or

                             (ii)  in order to care for one or more children to whom she has given birth; or

                            (iii)  in order to recover from the pregnancy; and

                     (d)  any other requirements specified in the Rules have been met.

             (4)  A person is taken, for the purposes of paragraph (2)(d), to have ceased the person’s practice as an eligible midwife because of permanent disability if and only if:

                     (a)  the person has incurred an injury, or suffers from an illness, that is permanent, or is likely to be permanent; and

                     (b)  as a result of the injury or illness, the person can no longer practise the profession of midwifery; and

                     (c)  another person who is a medical practitioner has certified, in the form approved by the Medicare Australia CEO, that the person:

                              (i)  has incurred an injury, or suffers from an illness, that is permanent, or is likely to be permanent; and

                             (ii)  can no longer practice the profession of midwifery; and

                     (d)  the person has permanently ceased all practice as an eligible midwife.

             (5)  In this section:

private practice as a midwife means practice as a midwife other than:

                     (a)  practice consisting of treatment of public patients of a hospital; or

                     (b)  practice for which:

                              (i)  the Commonwealth, a State or a Territory; or

                             (ii)  a local governing body; or

                            (iii)  an authority established under a law of the Commonwealth, a State or a Territory;

                            indemnifies eligible midwives from liability relating to compensation; or

                     (c)  practice of a kind in relation to which eligible midwives are ordinarily, or could reasonably be expected in the ordinary course of business to be, engaged as employees (and therefore indemnified from liability by their employer); or

                     (d)  practice conducted outside both Australia and the external Territories; or

                     (e)  practice of a kind specified in the Rules.



 

Division 2 Run-off cover Commonwealth contributions

32  Circumstances in which run-off cover Commonwealth contributions are payable

             (1)  A run-off cover Commonwealth contribution is payable to an eligible insurer under this section if:

                     (a)  an eligible run-off claim (the current claim ) is made that relates to an incident that occurred in the course of, or in connection with, a person’s practice as an eligible midwife; and

                     (b)  at the time the claim is first notified to the eligible insurer, the person is a person to whom subsection 31(2) applies; and

                     (c)  in a case where there is a person, other than the eligible midwife, against whom a claim has been, or could reasonably be made in relation to the incident to which the current claim relates—either:

                              (i)  an apportionment certificate in relation to the current claim is in force; or

                             (ii)  the Medicare CEO has not issued an apportionment certificate because of the operation of section 52 (which deals with claims for which there is a final judgment or order of a court); and

                     (d)  the eligible insurer makes, or is liable to make, a payment in relation to the claim under a contract of insurance under which the insurer is liable to indemnify the person in relation to claims made by or against the person while he or she is a person to whom subsection 31(2) applies; and

                     (e)  either the incident occurs or occurred on or after 1 July 2010 and on or before the run-off cover termination date; and

                      (f)  the eligible insurer applies to the Medicare Australia CEO for the run-off cover Commonwealth contribution in accordance with section 58; and

                     (g)  if an apportionment certificate is in force in relation to the current claim—the amount paid or payable in relation to the current claim is consistent with the proportion of the overall liability specified in the apportionment certificate as the proportion that is to be attributed to the eligible midwife against whom the claim was made.

             (2)  Paragraph (1)(d) does not apply to a payment that an eligible insurer makes or is liable to make unless the payment is or would be made:

                     (a)  in relation to a claim made in relation to which the eligible midwife concerned has midwife professional indemnity run-off cover; and

                     (b)  in the eligible insurer’s ordinary course of business.

33   Clarification of circumstances in which run-off cover Commonwealth contributions are payable

                   A run-off cover Commonwealth contribution is payable to an eligible insurer under section 32 in relation to a payment the eligible insurer makes or is liable to make, in relation to a claim even if the eligible insurer:

                     (a)  has insured itself in relation to the payment; or

                     (b)  has already been paid an amount by an insurer in relation to the payment.

34   Exceptions

                   A run-off cover Commonwealth contribution is not payable to an eligible insurer under section 32 in relation to a payment the eligible insurer makes or is liable to make, in relation to a claim if:

                     (a)  the payment is an insurer-to-insurer payment; or

                     (b)  the payment is a payment specified in the Rules for the purposes of this section.

35   Amount of run-off cover Commonwealth contribution

             (1)  The amount of a run-off cover Commonwealth contribution is the amount of the payment referred to in paragraph 32(1)(d), but only to the extent that the payment is or would be made:

                     (a)  in relation to a claim for which the midwife has midwife professional indemnity run-off cover; and

                     (b)  in the eligible insurer’s ordinary course of business.

             (2)  However, if a Level 1 or Level 2 Commonwealth contribution is payable in respect of that payment, the amount of the run-off cover Commonwealth contribution is reduced by the amount of the Level 1 or Level 2 Commonwealth contribution.



 

Division 3 Payments that would have reduced the amount of run-off cover Commonwealth contribution

36   Amounts paid before payment of run-off cover Commonwealth contribution

             (1)  If:

                     (a)  an amount (the relevant payment ) has been paid, in relation to a liability of an eligible midwife (the midwife ), under a contract of insurance with an eligible insurer that provides midwife professional indemnity run-off cover for the midwife; and

                     (b)  another amount (not being an amount referred to in subsection (2)) has been paid to the midwife, eligible insurer or another person in relation to the incident to which the liability relates; and

                     (c)  the other amount was not taken into account in working out the amount of the relevant payment; and

                     (d)  if the other amount had been taken into account in working out the amount of the relevant payment, a lesser amount would have been paid under the contract of insurance, in relation to the liability;

then, for the purpose of calculating the amount of run-off cover Commonwealth contribution (if any) that is payable in relation to a liability of the midwife, the lesser amount is taken to have been the amount of the relevant payment.

             (2)  This section does not apply to any of the following:

                     (a)  an amount paid to an eligible insurer by another insurer under a right of contribution;

                     (b)  a payment of Level 1 Commonwealth contribution;

                     (c)  a payment of Level 2 Commonwealth contribution;

                     (d)  an amount of a kind specified in the Rules for the purposes of this paragraph.

37   Amounts paid after payment of run-off cover Commonwealth contribution

             (1)  This section applies if:

                     (a)  an amount (the actual run-off cover amount ) of run-off cover Commonwealth contribution has been paid in relation to an eligible run-off claim made against an eligible midwife (the midwife ); and

                     (b)  another amount (not being an amount referred to in subsection (5)) is paid to the midwife, an eligible insurer or another person in relation to the incident to which the claim relates; and

                     (c)  the other amount was not taken into account in calculating the actual run-off cover amount; and

                     (d)  if the other amount had been so taken into account, a lesser amount (the reduced run-off cover amount , which could be zero) of run-off cover Commonwealth contribution would have been paid in relation to the liability.

             (2)  The amount overpaid is the amount by which the actual run-off cover amount exceeds the reduced run-off cover amount.

             (3)  If the Medicare Australia CEO has given an eligible insurer a notice under subsection 39(1) in relation to the amount overpaid, the amount is a debt owed to the Commonwealth by the eligible insurer.

             (4)  The amount overpaid may be recovered:

                     (a)  by action by the Medicare Australia CEO against the eligible insurer in a court of competent jurisdiction; or

                     (b)  under section 65.

             (5)  This section does not apply to any of the following:

                     (a)  an amount paid to an eligible insurer by another insurer under a right of contribution;

                     (b)  a payment of Level 1 Commonwealth contribution;

                     (c)  a payment of Level 2 Commonwealth contribution;

                     (d)  an amount of a kind specified in the Rules for the purposes of this paragraph.

38   Obligation to notify the Medicare Australia CEO that amount has been paid

             (1)  If:

                     (a)  a run-off cover Commonwealth contribution has been paid to an eligible insurer in relation to a liability that relates to a claim made against an eligible midwife (the midwife ); and

                     (b)  the eligible insurer becomes aware that another amount has been paid to the midwife, eligible insurer or another person in relation to the incident to which the claim relates; and

                     (c)  because of the payment of the other amount, there is an amount overpaid as described in subsection 37(2);

the eligible insurer must notify the Medicare Australia CEO that the other amount has been paid.

Note:          Failure to notify is an offence (see section 67).

             (2)  The notification must:

                     (a)  be in writing; and

                     (b)  be given to the Medicare Australia CEO within 28 days after the applicant becomes aware that the other amount has been paid.

39   The Medicare Australia CEO to notify of amount of debt due

             (1)  If:

                     (a)  a run-off cover Commonwealth contribution has been paid to an eligible insurer in relation to a liability that relates to a claim made against an eligible midwife; and

                     (b)  another amount is paid to the midwife, eligible insurer or another person in relation to the incident to which the claim relates; and

                     (c)  because of the payment of the other amount, there is an amount overpaid as described in subsection 37(2);

the Medicare Australia CEO may give the eligible insurer a written notice that specifies:

                     (d)  the amount overpaid, and that it is a debt owed to the Commonwealth under subsection 37(3); and

                     (e)  the day before which the amount must be paid to the Commonwealth; and

                      (f)  the effect of section 40.

The day specified under paragraph (e) must be at least 28 days after the day on which the notice is given.

             (2)  The debt becomes due and payable on the day specified under paragraph (1)(e).

40   Penalty imposed if an amount is repaid late

             (1)  If:

                     (a)  a person owes a debt to the Commonwealth under subsection 37(3); and

                     (b)  the debt remains wholly or partly unpaid after it becomes due and payable;

the person is liable to pay a late payment penalty under this section.

             (2)  The late payment penalty is calculated:

                     (a)  at the rate specified in the Rules for the purposes of this paragraph; and

                     (b)  on the unpaid amount; and

                     (c)  for the period:

                              (i)  starting when the amount becomes due and payable; and

                             (ii)  ending when the amount, and the penalty payable under this section in relation to the amount, have been paid in full.

             (3)  The Medicare Australia CEO may remit the whole or a part of an amount of late payment penalty if the Medicare Australia CEO considers that there are good reasons for doing so.

             (4)  An application may be made to the Administrative Appeals Tribunal for review of a decision of the Medicare Australia CEO not to remit, or to remit only part of, an amount of late payment penalty.

Note:          Section 27A of the Administrative Appeals Tribunal Act 1975 requires notification of a decision that is reviewable.



 

Division 4 Effect of setting a run-off cover termination date

41   Commonwealth’s obligations if a run-off cover termination date is set

             (1)  If a run-off cover termination date has been set (see subsection 7(3)), the Commonwealth is liable to pay an amount in accordance with this Division in relation to each affected eligible midwife.

             (2)  However, this section does not apply if the Rules made on or before the run-off cover termination date set out alternative arrangements for providing medical cover for eligible midwives in relation to eligible run-off claims that will apply on and from that date.

42   Affected eligible midwife

                   An eligible midwife is an affected eligible midwife if:

                     (a)  a run-off cover termination date has been set (see subsection 7(3)); and

                     (b)  before that date, one or more premiums have been paid for midwife professional indemnity cover, for the eligible midwife, in relation to one or more periods totalling at least 12 months; and

                     (c)  immediately before that date, the eligible midwife was not a person to whom subsection 31(2) applies.

43   Payments in relation to affected eligible midwife

             (1)  A payment that the Commonwealth is liable to make in relation to an affected eligible midwife:

                     (a)  must be paid to a person who:

                              (i)  is nominated by the eligible midwife; and

                             (ii)  has, on or after the run-off cover termination date, provided midwife professional indemnity cover for the eligible midwife under a contract of insurance; and

                     (b)  must be paid as all or part of the premium payable for the provision of that cover; and

                     (c)  must be paid within 12 months after that date; and

                     (d)  must not exceed the eligible midwife’s total run-off cover credit.

             (2)  Amounts payable by the Commonwealth under this Division are payable out of the Consolidated Revenue Fund, which is appropriated accordingly.

44   Total run-off cover credits

             (1)  This is how to work out an affected eligible midwife’s total run-off cover credit :

Method statement

Step 1.   For the first financial year after 30 June 2010 in which an eligible insurer provided midwife professional indemnity cover for the eligible midwife under a contract of insurance, multiply:

               (a)     the eligible midwife’s run-off cover credit for the financial year; by

              (b)     the interest rate adjustment for the financial year (see subsection (4)).

Step 2.   For each subsequent financial year (if any) until the financial year in which the termination date occurs, multiply:

               (a)     the sum of the eligible midwife’s run-off cover credit for the financial year and the amount worked out, under step 1 or this step, for the immediately preceding financial year; by

              (b)     the interest rate adjustment for the financial year (see subsection (4)).

Step 3.   Add together:

               (a)     the eligible midwife’s run-off cover credit for the financial year in which the run-off cover termination date occurs; and

              (b)     the last of the amounts worked out under step 1 or step 2.

              The result is the practitioner’s total run-off cover credit .

             (2)  The eligible midwife’s run-off cover credit for a financial year is the sum of all run-off cover support payments paid or payable to the extent that they are attributable, under subsection (3), to the eligible midwife in relation to the financial year.

             (3)  Run-off cover support payments are attributable to the practitioner in relation to the financial year to the extent that they relate to premiums paid during the financial year to an eligible insurer for midwife professional indemnity cover provided for the eligible midwife by one or more contracts of insurance with the eligible insurer.

             (4)  The interest rate adjustment for a financial year is the number worked out as follows:

where:

applicable interest rate is:

                     (a)  the rate of interest, for the financial year, specified in the Rules for the purposes of this paragraph; or

                     (b)  if no rate is so specified—the short-term bond rate for the June quarter immediately preceding the financial year.

June quarter means a period of 3 months commencing on 1 April.

short-term bond rate , for a June quarter, means:

                     (a)  if:

                              (i)  the Reserve Bank of Australia has published, in respect of one or more days in the last 2 weeks of the quarter, an indicative secondary market mid-rate yield for Australian Government fixed coupon Treasury bonds; and

                             (ii)  the maturity date of the bonds is the third anniversary of the 15th day of the quarter or (if there are no bonds with that maturity date) the closer or closest date to that date within 2 years after it;

                            the yield referred to in subparagraph (i) in respect of the day referred to in that subparagraph, or the average of the yields referred to in subparagraph (i) in respect of the days referred to in that subparagraph, as the case requires; or

                     (b)  in any other case—the rate of interest notified in the Gazette , by the Minister administering the Loan (Income Equalization Deposits) Act 1976 , as the rate of interest in relation to the quarter for the purposes of this definition.

45   Eligible insurers must provide information attributing run-off cover support payments

             (1)  An eligible insurer must, in relation to each run-off cover support payment that the eligible insurer is liable to make to the Medicare Australia CEO, notify the Medicare Australia CEO of:

                     (a)  each eligible midwife to whom the payment is attributable; and

                     (b)  for each such eligible midwife, each financial year in relation to which the payment is attributable; and

                     (c)  for each such eligible midwife and financial year, the extent to which the payment is attributable to the practitioner in relation to the financial year.

Note:          Failure to notify is an offence (see section 67).

             (2)  The notification must:

                     (a)  be made in writing; and

                     (b)  must be given to the Medicare Australia CEO on or before the payment day under section 75 for the run-off cover support payment.



 

Division 5 Miscellaneous

46   Medicare Australia CEO must be notified of a person ceasing to be covered by the midwife run-off cover provisions

             (1)  If:

                     (a)  a person ceases to be a person to whom subsection 31(2) applies; and

                     (b)  immediately before the cessation, an eligible insurer was providing midwife professional indemnity run-off cover to the person;

the eligible insurer must notify the Medicare Australia CEO of the cessation.

Note:          Failure to notify is an offence (see section 67).

             (2)  The notification must:

                     (a)  be in writing; and

                     (b)  set out details of the cessation; and

                     (c)  be given to the Medicare Australia CEO within a period, starting on the day after the day on which the person becomes aware of the cessation, of:

                              (i)  61 days; or

                             (ii)  such greater number of days specified in the Rules for the purposes of this subparagraph.

47   Invoices for midwife professional indemnity cover

             (1)  If:

                     (a)  an eligible insurer gives to a person an invoice stating the premium that is or will be payable for midwife professional indemnity cover provided by a contract of insurance with the eligible insurer; and

                     (b)  payment of the premium would increase the eligible insurer’s liability to pay run-off cover support payment;

the eligible insurer must ensure that the invoice states:

                     (c)  the amount of the eligible insurer’s premium income, for the contribution year in question, that represents the premium that is or will be payable for midwife professional indemnity cover provided by the contract of insurance; and

                     (d)  the applicable percentage relating to that contribution year; and

                     (e)  the amount of the run-off cover support payment imposed on the eligible insurer, for that contribution year, that relates to the premium that is or will be payable for midwife professional indemnity cover provided by the contract of insurance.

Note:          Failure to comply with this section is an offence (see section 69).

             (2)  In this section:

applicable percentage has the same meaning as in subsection 6(2) of the Midwife Professional Indemnity (Run-off Cover Support Payment) Act 2010 .

premium income has the same meaning as in the Midwife Professional Indemnity (Run-off Cover Support Payment) Act 2010 .

run-off cover support payment has the same meaning as in the Midwife Professional Indemnity (Run-off Cover Support Payment) Act 2010 .

48   Reports on run-off cover Commonwealth provisions

             (1)  The Minister must, in relation to each financial year starting on or after 1 July 2010:

                     (a)  cause a report to be prepared of the operation of this Part within 6 months after the end of the financial year; and

                     (b)  cause a copy of the report to be tabled in each House of the Parliament within 15 sitting days of that House after its receipt by the Minister.

             (2)  Without limiting the matters that may be included in a report under subsection (1) in relation to a financial year, the report must include:

                     (a)  a statement of the number of persons who were, at the end of the financial year, persons to whom subsection 31(2) applies; and

                     (b)  a statement of the total of all the amounts of run-off cover Commonwealth contribution paid by the Commonwealth during the financial year; and

                     (c)  a statement of the total of all the amounts of run-off cover support payments paid to the Commonwealth during the financial year; and

                     (d)  estimates by the Actuary of the Commonwealth’s liabilities in relation to amounts of run-off Commonwealth contributions in future financial years.

             (3)  If a run-off cover termination date has been set (see subsection 7(3)), this section does not apply in relation to a financial year starting after the end of the financial year in which the termination date occurs.

49   Modifications and exclusions

             (1)  The Rules may provide that this Part applies with specified modifications in relation to:

                     (a)  a specified class of claims; or

                     (b)  a specified class of contracts of insurance; or

                     (c)  a specified class of situations in which a liability is, whether wholly or partly, covered by more than one contract of insurance.

             (2)  The Rules may provide that this Part does not apply, or applies with specified modifications, in relation to a specified class of liabilities or payments.

             (3)  Without limiting subsection (2), the Rules may specify modifications regarding how this Part applies in relation to a liability under an order of a court requiring an amount to be paid pending the outcome of an appeal, including modifications:

                     (a)  to deal with what happens if, as a result of the appeal or another appeal, the amount paid later becomes wholly or partly repayable; and

                     (b)  to deal with what happens if the amount paid is later applied towards a liability that is confirmed as a result of the appeal or another appeal.

             (4)  This section does not allow the Rules to modify a provision that creates an offence, or that imposes an obligation which, if contravened, constitutes an offence.