Judgment date: 21 April 2010, CIC Allianz Insurance Limited v Erturk [2010] NSWSC 302, Supreme Court1
In Brief
- An insurer is bound by a Section 81 Notice admitting fault whilst the matter remains in the CARS process.
- On an Application for Mandatory Exemption, the PCA is not permitted to look behind a validly issued Section 81 Notice to consider the circumstances in which it was produced.
- An insurer remains bound by its Section 81 Notice even whether an admission contained in that Notice was made as a consequence of an honest mistake.
Background
The Supreme Court handed down its decision in CIC Allianz Insurance Limited v Erturk on 21 April 2010.
The insurer in that matter sought review of a decision by the Principal Claims Assessor refusing to grant a Mandatory Exemption under s 92(1)(a) of the Motor Accidents Compensation Act 1999. Judicial review was also sought of a decision by a Claims Assessor to refuse an Application for Discretionary Exemption under s 92(1)(b).
The central issue in dispute was whether the insurer was bound, within the CARS process, by a Section 81 Notice which mistakenly admitted fault.
The background facts were that an experienced and well regarded Claims Manager made a simple error, in the context of a busy portfolio of files, and issued a Section 81 Notice which admitted fault in circumstances where there were viable reasons to place negligence in issue. There was no dispute in the proceedings that the mistake was an honest one, arising from human error.
The result, however, was that a Section 81 Notice existed which correctly identified the matter by name, date and location, and which admitted fault in respect of the accident which occurred on that day and place involving the named claimant.
Upon discovering the error, the insurer sought to serve an Amended Section 81 Notice denying fault. The insurer then sought a Mandatory Exemption under s 92(1)(a) on the grounds of the denial contained in the Amended Section 81 Notice. In the alternative, the insurer sought a Discretionary Exemption under s 92(1)(b) on the grounds that there was a complex legal issue with regard to whether the insurer should be held to the first Section 81 Notice.
In respect of the Application for Mandatory Exemption, the PCA held that the first Section 81 Notice was a valid Notice and concluded that the insurer was bound by the admission contained in that Notice whilst in the CARS process, and, as such, there were no grounds for Mandatory Exemption under the Guidelines.
In respect of the Application for Discretionary Exemption, the Claims Assessor rejected the insurer's argument that there was any complex issue with regard to the validity of the first Section 81 Notice and found no Discretionary grounds for an Exemption.
Supreme Court
The primary issue which occupied the court's time was whether or not an insurer is able to depart from a Section 81 Notice, admitting fault, which was produced through an honest error.
The insurer submitted that for the first Section 81 Notice to be valid – or a proper Notice – it must have been one where the insurer turned its mind to the actual claim made by the claimant and not a claim by somebody else in some other motor accident. Given that the Claims Manager made a simple error by making a liability recommendation which analysed the circumstances of a different accident involving an insured with a similar name, the insurer argued that the first Section 81 Notice was no notice at all and that the first valid Section 81 Notice was the second Notice which placed liability in issue.
From paragraphs 92-98, Simpson J explained her reasons for rejecting the insurer's argument and holding that the insurer was bound by the first Section 81 Notice, notwithstanding the honest mistake made by the Claims Manager.
Specifically, Simpson J reasoned as follows:
As has been noted more than once, Section 81 makes no provision for the withdrawal of an admission of liability (by contrast with a denial of liability, which can, effectively, be withdrawn or superseded (see sub-s (4)). Except as provided by sub-s (4), the section makes no provision for a second, substitute or replacement Certificate to be issued. A Certificate admitting liability, once issued, is final for the purpose of the statutory scheme.
The PCA has given no express power to go behind a Certificate. Nor do I read into the legislation any implied power to do so. A Certificate that on its face admits liability for the claim that it identifies is binding on the PCA...
The balance of clause 8 of the Guidelines sets out, in my opinion exhaustively, the circumstances in which the PCA is obliged to issue a Certificate of Exemption. None here is applicable.
Nowhere in the Act or Guidelines is the PCA given any power to consider the circumstances in which an insurer issues an apparently binding and valid Certificate, or to relieve the insurer of the effects of issuing, by mistake, a Certificate admitting liability; nowhere is the PCA given any discretion to allow an insurer to depart from the terms of any admission."
As such, the Supreme Court found no error of law in the PCA's decision to dismiss the Application for Exemption under s 92(1)(a).
The Supreme Court also found no error in the exercise of the Claims Assessor's discretion to reject the Application for a Discretionary Exemption under s 92(1)(b). The Claims Assessor characterised the Application as, in essence, an appeal from the PCA's decision on the Mandatory Exemption Application. He also found that there was no complexity in the assessment of the claim. The only complexity related to the insurer's attempt to escape the consequences of the error made in issuing the Section 81 Notice. The Supreme Court found no error in the Claims Assessor's Reasons. The Application for Judicial Review was, therefore, dismissed.
Implications
The decision in CIC Allianz Insurance v Erturk confirms that an insurer cannot depart from a Section 81 Notice, admitting fault,whilst within the CARS process.
The Court of Appeal held in The Nominal Defendant v Gabriel [2007] NSWCA 52 that, once proceedings are commenced, the defendant may file a Defence inconsistent with the Section 81 Notice previously issued by the relevant CTP insurer.
However, unless or until a matter finds its way to court, a Section 81 Notice issued by the insurer conclusively certifies the liability status of the claim and is "set in stone".
The decision in Erturk emphasises that an insurer remains bound by its Section 81 Notice even where there is no dispute that the content of the Notice was produced through an honest mistake.
Where the Notice properly identifies the claim by claimant name, date and location (for example), the insurer is bound by the content of the Notice irrespective of how the Notice was produced.
However, the decision in Erturk does not address whether an insurer may depart from a Section 81 Notice, admitting fault, where that Notice was induced by either fraud or misleading conduct by the claimant or some other witness. It remains arguable that an insurer may depart from a Section 81 Notice in those circumstances.
In the meantime, the decision in Erturk underscores the importance of taking great care in the preparation of Section 81 Notices.
1. Simpson J
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.
