PCA allows second Section 81 Notice adding allegation of Contributory Negligence

SECTION 81 NOTICES¹

In Brief

• The Principal Claims Assessor (PCA) has recently exempted a claim pursuant to s 92(1)(a) and cl 8.11.2 of the Claims Assessment Guidelines, based on an insurer issuing a second Section 81 Notice alleging 33% contributory negligence, after admitting fault in the first Section 81 Notice.
• The PCA held that the second Section 81 Notice was characterised as a 'clarification' of the first Section 81 Notice.
• Arguably, this interpretation opens the door for insurers to consider other additional allegations which "clarifies" the extent of the partial admission above and beyond an admission of fault. Examples could include, but are not limited to the following:
• • admitting fault but denying causation of injury;
  • admitting fault but denying due search and enquiry of identity of unidentified vehicle;
  • admitting fault but denying that the injury caused by an uninsured vehicle occurred in an area open to and used by the public.²

Background

The PCA's decision was in relation to an insurer's application under s 92(1)(a) for Exemption based on cl 8.11.2 of the Claims Assessment Guidelines.

On 29 April 2010, the insurer issued a Section 81 Notice admitting fault. On 31 January 2012, the insurer's legal representatives sent a letter to the claimant's solicitor maintaining the breach of duty of care, however alleging contributory negligence of 33% based on the allegation of the claimant not wearing a seatbelt. The insurer relied upon an ambulance report indicating that the claimant was not wearing a seatbelt, and upon a factual investigation report.

The claimant argued that, as the letter of 31 January 2012 did not deviate from the insurer's position under s 81, the insurer was not entitled to withdraw or amend its Section 81 Notice in the CARS process and was bound by the original Section 81 Notice.

Essentially the issue which was considered by the PCA was whether the insurer was entitled to amend or issue a second Section 81 Notice.

The PCA's Reasoning

The PCA referred to a number of court decisions as follows:

• CIC Allianz Insurance Ltd v Ertuk & Ors ³. In this case, the insurer sought to withdraw its admission of fault on the grounds that this was made by mistake. At first instance before the PCA the insurer's application was rejected. The insurer appealed to the Supreme Court which agreed with the PCA that the first Section 81 Notice was valid and the insurer could not amend the Section 81 Notice.
• QBE Insurance v Motor Accidents Authority ⁴. In this case, the insurer in its first Section 81 Notice admitted breach of duty of care with 20% contributory negligence. After a period of 2½ years the insurer issued a second Section 81 Notice alleging 40% contributory negligence and applied for an exemption under s 92(1)(a). At first instance before the PCA the insurer's application was rejected based on the insurer being unable to depart from admissions made in the first Section 81 Notice whilst in the CARS process. The insurer appealed to the Supreme Court which agreed with the PCA and decided against the insurer.
• Nominal Defendant v Gabriel & Anor ⁵. In this case, the insurer, after being granted an exemption at CARS, sought to revoke its Section 81 Notice admitting breach of duty of care with an allegation of 25% contributory negligence. Prior to court proceedings being commenced, the insurer issued a second Section 81 Notice withdrawing its admission of breach of duty of care in order to deny liability. The Court of Appeal held that the admission of breach of duty of care is a partial admission of liability. Further, the Motor Accidents Compensation Act 1999 does not allow for any amended Section 81 Notice that retracts a previously made admission of liability. Therefore in this case the insurer was unable to withdraw its Section 81 Notice because it was not made in court proceedings. If it was made in court proceedings, it would have open for the insurer to provide an explanation in order to attempt to withdraw an admission.
• Australian Associated Motor Insurance Ltd v Cassidy & Ors⁶. In this case, the insurer issued a Section 81 Notice admitting fault and then issued a second Section 81 Notice denying fault. At first instance the PCA rejected the insurer's Application for Exemption based on the insurer not being able to deviate from an admission of fault whilst in the CARS process. The insurer appealed to the Supreme Court which agreed with the PCA's decision.

The PCA distinguished the above cases on the basis that in the current matter before her, the insurer, in its second Section 81 Notice was not seeking to withdraw its admission of fault. The second Section 81 Notice maintained the admission of fault but alleged contributory negligence, which the PCA characterised as a "clarification" of the first Notice.

The PCA noted that the case law made it clear that an insurer, whilst in the CARS process, is bound by the Section 81 Notice itself, but not by the admissions contained within it.

Therefore the insurer's Application for Exemption was allowed.

Implications

The PCA's reasoning, in our view, is sound. As stated above, this decision, whilst not binding, may provide opportunities in relevant matters, for insurers to "clarify" Section 81 Notices in matters where admissions of breach of duty of care are maintained but allegations of contributory negligence based on any number of factors are available.

Significantly, the PCA, in passing, noted that she may have been inclined to exempt the claim pursuant to s 92(1)(a) and cl 8.11.6 of the Claim Assessment Guidelines had the insurer alleged fraud. The claimant in his Claim Form indicated that he was wearing a seatbelt and completed the attached Statutory Declaration declaring that the information in the Claim Form is true and correct. The insurer in this case subsequently alleged that this was not accurate based on further investigations. Therefore, an Application for Exemption on the basis of fraud may have been successful.

¹ Motor Accidents Compensation Act 1999
² For a more exhaustive list and for a detailed analysis of s 81 generally, refer to Curwoods Lawyers Industry News titled "Section 81 Notices: The Landscape Following Gudelj v Motor Accidents Authority" by Peter Hunt dated 7 July 2011.
³ [2010] NSWSC
⁴ [2008] NSWSC
⁵ [2007] NSWCA
⁶ [2009] NSWSC

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