Judgment date: 5 August 2011
GIO General Limited v Smith and Ors; Insurance Australia Limited tradingas NRMA Insurance Limited v Smith and Ors  NSWSC 802
Supreme Court of New South Wales 1
" Where there is a 'subsequent and unrelated injury of condition', cl 1.36 of the Permanent Impairment Guidelines requires that a Medical Assessor calculate first, the impairment arising from the subsequent injury; and second, the impairment arising from the motor accident.
" 'Subsequent and unrelated injury or condition' refers to the event causing the subsequent injury, not the medical description of the subsequent injury.
" The calculation of impairment arising from 'the relevant motor vehicle accident' is to be made at the time of the assessment.
The claimant was involved in 2 motor vehicle accidents. The first occurred on 12 March 2007 and the second occurred on 26 November 2007. The claimant made a claim against GIO for the first accident and NRMA for the second accident.
The claimant sought assessment of his psychiatric impairment arising from each accident, however, the claimant did not develop a psychiatric condition until after the second accident. Assessor Teoh, to whom both claims were allocated, concluded that the claimant suffered from a chronic adjustment disorder with depressed and anxious mood and found a total of 15% WPI. The psychological injury was caused by the pain of the physical injuries sustained in each accident but did not become symptomatic until after the second accident. Assessor Teoh assessed the claimant's whole person impairment at 15% and issued a Certificate in each claim certifying greater than 10% WPI on the basis that each accident contributed to the painful physical condition which caused the psychological condition. Both insurers sought a Review under s 63 of the Motor Accidents Compensation Act (the Act). The Proper Officer accepted reasonable cause to suspect an error and the medical disputes were referred to the Review Panel.
The Review Panel adopted a similar approach to Assessor Teoh.
The Review Panel found that both accidents contributed to the physical pain from which the psychiatric condition arose, even though there were no symptoms until after the second accident. The Review Panel increased the percentage of WPI to 17%.
The Review Panel stated that they based their finding on causation on the decision of Johnson J in Ackling v QBE Insurance (Australia) Limited and Anor (Ackling) 2. The Review Panel stated that:
"In that matter it was found that impairment occurring after a second injury could be attributable to an initial motor accident which caused physical injuries without a psychiatric disorder being apparent until after a second injury exacerbated the first injury."
The Review Panel was at pains to explain the thinking behind its reasoning, as follows:
"The Panel wants its decision clearly understood, especially when consideration is given to the amount of compensation to be made in relation to each accident. By applying The Guidelines, the Panel was obliged to conclude, for the reasons given above, that both accidents caused a Major Depressive Disorder which gave rise to a permanent impairment of 17%, which was greater than 10%. Just as it would have been unfair to the claimant if a 17% WPI had been divided by the two accidents resulting in each accident being said to cause an impairment of 8.5% (ie not greater than 10%), it would also be unfair if the Panel's decision was misconstrued to imply that each accident caused two separate injuries of Major Depressive Disorder each producing a WPI of 17%. Rather it was the Panel's decision that both accidents together caused the Major Depressive Disorder which gave rise to a WPI of 17% but by applying The Guidelines the Panel was obliged to certify that each accident caused Major Depressive Disorder giving rise to a whole person impairment which is greater than 10%."
Each insurer sought administrative law relief in the Supreme Court.
The parties accepted the overall finding of 17% WPI was open to the Review Panel. The sole issue in dispute was whether the Review Panel erred in failing to properly apportion that impairment between the 2 accidents.
GIO submitted firstly that a correct application of cl 1.33 (which relates to pre-existing injuries) would result in a nil deduction when the Review Panel was considering WPI arising out of the second accident because there were no psychiatric symptoms pre-existing the second accident, and that the Review Panel had incorrectly assumed that the submissions made by QBE in the Ackling decision actually formed part of the Judgment. In the alternative it was submitted that cl 1.36 applied when considering the first accident which required the reduction of the contribution to the assessment of WPI caused by the second accident. The Review Panel incorrectly interpreted the meaning of "unrelated injury" in that clause to mean "to another body part" rather than meaning "another accident". If the correct interpretation of that clause had been applied, then apportionment was able to be made.
The claimant submitted that the result of 2 MAS Certificates certifying 17% was based on a correct application of the Guidelines; that the Guidelines were drafted in such a manner which would bring about such a result; and because there had been no error, the Court could not interfere with the result.
NRMA agreed with GIO and adopted GIO's alternative submission. Justice Hoeben found that the Review Panel made 3 errors. Firstly, it took into account concepts of "fairness" and "unfairness" which were irrelevant; secondly, it misinterpreted the decision in Ackling; and thirdly, it incorrectly applied Guideline 1.36.
Clause 1.33 – Pre-Existing Injuries
The Review Panel made a finding of fact that both accidents contributed to the psychiatric condition by causing the claimant's physical pain. Their reliance on the Ackling decision was clearly wrong however the extent of their reliance on this decision was unclear. However, it was a finding of fact that both accidents contributed to the Major Depressive Disorder and his Honour said that those factual findings were properly made.
Clause 1.36 – Subsequent Injuries
Justice Hoeben also held that the Review Panel ought to have applied cl 1.36 of the Guidelines.
After noting that the Review Panel should not concern itself with issues of 'fairness' or 'unfairness', Hoeben J held that [emphasis added]:
"The correct interpretation of the second sentence in Guideline 1.36 is that the words 'unrelated injury or condition' refer to the event causing the subsequent injury, not themedical description of the subsequent injury." 3
Further, Hoeben J held that cl 1.36 did not call for any deduction or apportionment in every case 4. Rather, a deduction may be required where there is a subsequent "unrelated injury" which is not brought about by a motor accident. Where the subsequent permanent impairment is caused by another motor accident, the Guidelines require that the value of the permanent impairment arising from each event be calculated.
Finally, after referring to Allianz v Motor Accidents Authority of NSW & Ors 5 with approval, Hoeben J said that the Review Panel was obliged to:
"[calculate] the value of the permanent impairment arising from the "relevant motor accident" and the value of the permanent impairment resulting from the subsequent motor accident ... in accordance with Chapter 7 of the Guidelines at the time of the assessment."6
Given these findings, Hoeben J accepted that the Review Panel erred and referred the medical disputes back to the Review Panel for determination according to law.
The decision in GIO General Ltd v Smith provides useful guidance as to how permanent impairment should be assessed where the same body part or system is injured as a consequence of 2 motor accidents, even though symptoms may not arise until after the second accident.
In assessing the permanent impairment caused by the first accident, MAS must apply cl 1.36 of the Permanent Impairment Guidelines and separately calculate the impairment caused by each accident, as at the date of the medical assessment. In assessing the permanent impairment caused by the second accident, MAS must apply cl 1.33 and first assess the extent of the permanent impairment caused by the first accident, as at the time of the medical assessment, and then subtract that impairment from the claimant's total impairment.
Under either clause, the Medical Assessor must separately assess the permanent impairment caused by each accident, as at the date of the medical assessment, and issue Certificates accordingly.
Given this approach, insurers would be well advised to carefully prepare their MAS documents to ensure that the permanent impairment caused by either a prior or subsequent accident is properly documented through contemporaneous medical records or medico-legal opinion.
1 Judge Hoeben
2  NSWSC 881
3 Per Hoeben J at para 49. The dicta of Hidden J in Allianz Australia Insurance Ltd v Motor Accidents Authority of NSW & Ors  NSWSC 102 at paras 17-24 was also approved.
4 Per Hoeben J at para 54
5  NSWSC 102
6 Per Hoeben J at para 56
Ranked No 1 - Australia's fastest growing law firm' (Legal Partnership Survey, The Australian July 2010)
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.