AAMI v Cassidy & Ors  NSWSC 211
31 July 2008
- An Insurer is not able to withdraw an admission of liability – whether in whole or in part – contained in a Section 81 Notice.
- Whilst within the CARS process, an Insurer is not permitted to withdraw an admission of fault and seek mandatory exemption under s 92(1)(a).
- An admission of liability – whether in whole or in part – in a Section 81 Notice does not preclude the insurer from seeking to obtain a discretionary exemption under s 92(1)(b) based upon a change in position on liability.
The Supreme Court handed down its decision in AAMI v Cassidy on 31 July 2009.
The decision addresses whether the PCA erred in refusing a mandatory exemption based upon an amended Section 81 Notice.
The claimant was injured in a motor accident on 8 November 2004 and lodged a claim form on 13 March 2005.
The insurer issued a Section 81 Notice on 29 April 2005 wholly admitting fault. However, after referral of the claim to solicitors, the insurer issued a second Section 81 Notice on 20 June 2007 seeking to withdraw the admission contained in the first Section 81 Notice and substituting a denial.
The basis for the insurer's change in position was information in the Police Report that the claimant ran into the vehicle ahead of her before the insured collided with the rear of the claimant's vehicle. Importantly, the Police Report was available at the time the first Section 81 Notice was issued.
The insurer's change in position was based upon mistake by the original claims manager and the receipt of legal advice to that effect.
The PCA refused to allow a mandatory exemption on the grounds that the first Section 81 Notice was validly issued and admitted fault. As such, she found no grounds for a mandatory exemption under the Guidelines.
The insurer sought administrative law relief in the Supreme Court from the PCA's refusal.
After a thorough analysis of the Court of Appeal's decision in Nominal Defendant v Gabriel and the Supreme Court's decision in QBE Insurance v Motor Accidents Authority, Fullerton J held that the PCA made no error in deciding that an admission of liability by an Insurer – whether in whole or in part – could not be withdrawn. As such a second Section 81 Notice purporting to change the Insurer's stance on liability within the CARS process is of no effect.
His Honour also concluded that the PCA made no error in deciding that the Insurer's second Section 81 Notice did not permit the Insurer to seek a mandatory exemption under s 92(1)(a).
In AAMI v Cassidy, the Supreme Court confirmed that an insurer is not able to withdraw an admission of liability contained in a Section 81 Notice, whilst within the CARS process. As such, where an insurer seeks to withdraw an admission of fault, the PCA is not obliged to issue a mandatory exemption certificate under s 92(1)(a).
However, this does prevent the insurer from seeking – and the PCA from granting – a discretionary exemption under s 92(1)(b).
Indeed, the observations made by Fullerton J, at paragraph 36, endorse a discretionary exemption in these circumstances.
At paragraph 36, Fullerton J stated:
"I can readily see that where, for example, an insurer contends that liability was admitted on the basis of deliberately false information being included in the claim that would likely be a matter best resolved by litigation and a certificate of exemption would issue. If on the other hand the information upon which liability was admitted by the insurer is revealed later to have been simply misleading, whether as a result of error or inadvertence on the part of the claimant or because the insurer's investigations were inadequate (as seems to be the case here), the claim assessor may nevertheless take the view that the claim is suitable for assessment under the Act either because the misleading information is unlikely to be material to the issue of liability, assuming it to be disputed or, because for other reasons the claim is considered appropriate for assessment despite the misleading information. These are matters the Parliament has left for the discretion of officers charged with the statutory duties of administering the Act under Division 3 of Part 4.4. It is also consistent with the legislative scheme embodied in the Act that, by its structure and operation, gives precedence to a non-curial approach to claims resolution."
These comments endorse the notion that where an Insurer changes its position on liability within the CARS process, and seeks a discretionary exemption under s 92(1)(b), a CARS Assessor is obligated to assess whether the matter is "best resolved by litigation".
Where the change is based on the uncovering of deliberately false information, then it is strongly arguable that a discretionary exemption should be granted to allow the Court to decide whether the defendant was negligent, notwithstanding the out-of-court admission contained in the Section 81 Notice.
Where the change in position is the result of a mistake having been reversed, then the argument in favour of a discretionary exemption may be less strong. However, a CARS Assessor has the discretion under s 92(1)(b) to find the claim unsuitable for assessment.
Ultimately, whilst an Insurer is not permitted to withdraw an admission of liability contained in a Section 81 Notice, it does not follow that the matter can not be exempted. In appropriate circumstances, the Insurer's change in position on liability may render the claim unsuitable for assessment, in which case a discretionary exemption under s 92(1)(b) may be granted.
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