CUR CURWOODS NEWS BULLETIN SECTION 81 NOTICES: THE LANDSCAPE FOLLOWING AMENDMENT TO THE CLAIMS ASSESSMENT GUIDELINES

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1 CUR CURWOODS NEWS BULLETIN SECTION 81 NOTICES: THE LANDSCAPE FOLLOWING AMENDMENT TO THE CLAIMS ASSESSMENT GUIDELINES Background The newest version of the MAA Claims Assessment Guidelines (the CAGs) applies to all CARS Applications for Assessment or Exemption which are current as at 1 May 2014, and to all future Applications. There is one exception. Outlined below, the new Guidelines remove the ground for Mandatory Exemption based on allegations of contributory negligence exceeding 25%. That amendment only applies to CARS Applications made after 1 May As such, any Application for Exemption based upon an allegation of contributory negligence exceeding 25% will still be exempted, provided the CARS 1A is lodged prior to 1 May The MAA Claims Handling Guidelines (the CHGs) have also been amended to give Insurers further guidance on what is required in their Section 81 Notices. Mandatory Exemptions The new form of clause of the CAGs alters the existing regime for Mandatory Exemptions, as follows: Denial of Liability a Mandatory Exemption will now be issued where the Principal Claims Assessor (PCA) is satisfied that 'liability is expressly denied by the insurer, in writing, but only in circumstances where liability is denied because the fault of the owner or driver of a motor vehicle in the use or operation of the vehicle is denied' Contributory Negligence a Mandatory Exemption is no longer available (where the CARS 1A is lodged after 1 May 2014) in claims where the Insurer alleges contributory negligence in excess of 25% with the result that CARS will now assess all contributory negligence disputes, regardless of the percentage alleged, unless there are grounds for Discretionary Exemption Legal Incapacity a Mandatory Exemption will still be granted where the Claimant (or a dependant in a Compensation to Relatives claim) is under a legal incapacity Non-CTP Insurer a Mandatory Exemption will also still be granted where the claim is made against a non-ctp Insurer Denial of Indemnity a Mandatory Exemption will still be granted where the Insurer has denied indemnity to the owner and driver of the vehicle Fraud a Mandatory Exemption will still also be granted where the Insurer alleges 'a fraudulent claim in terms of the circumstances of the accident giving rise to the claim.' CURWOODS LAWYERS ABN Level 9, 95 Pitt Street, SYDNEY NSW 2000 T:

2 Whether a claim falls within any of the available categories for Mandatory Exemption is to be assessed 'at the time of the consideration of the application' by the PCA (or her delegate). Discretionary Exemptions The non-exhaustive grounds for Discretionary Exemption in clause of the CAGs have been amended to remove clause which previously listed deemed denials of liability. Otherwise, clause remains unamended. Section 81 Notice Requirements The new CHGs introduce new requirements for Section 81 Notices (paragraphs 5.4 to 5.7) and 'Other Liability Decisions' (paragraphs 5.8 to 5.9.2). These provisions draw a distinction between Section 81 Notices, which are issued within three months of the claim being made, and 'other liability decisions', which are communicated after the three-month deadline. In other words, letters communicating a liability position after the three-month deadline are not considered to be Section 81 Notices. In cases where the three-month period has passed, paragraph 5.8 requires the Insurer to communicate its position on liability within seven days of discovering the failure. As such, even where investigations are continuing, notice must be given immediately, not when the investigations are concluded. Whether a liability decision is made within three months or not, the document must: Indicate whether the Insurer admits or denies liability for the claim If liability is not wholly admitted, provide sufficient detail to enable the Claimant to understand the extent to which each element of liability is admitted Where contributory negligence is alleged, advise the Claimant of the percentage alleged Provide both reasons and evidence to support the Insurer's position. Denial of Liability As indicated, clause of the CAGs now provides that a Mandatory Exemption should be granted where the PCA is satisfied that: "Liability is expressly denied by the insurer, in writing, but only in circumstances where liability is denied because the fault of the owner or driver of a motor vehicle in the use or operation of the vehicle is denied." As such, a Mandatory Exemption will only be granted where the Insurer has indicated in writing that both: Liability is expressly denied, and Fault of the owner or driver of the motor vehicle in the use or operation of the vehicle is denied. Page 2 of 5

3 In order to obtain a Mandatory Exemption, we recommend that your Section 81 Notice read: We have investigated the circumstances of the accident and determined that our Insured driver was not at fault. We therefore deny all liability to pay compensation in this claim. We deny fault because [insert details] and we rely on the following evidence [insert]. We highlight, however, that in light of the new CAGs a Mandatory Exemption will not be granted in any of the following circumstances: Where fault is admitted, but liability is denied as a consequence of procedural issues Where fault is admitted, but liability is denied because causation is disputed Where fault is admitted in a nervous shock claim, but a 'close family member' is disputed Where fault is admitted in a nervous shock claim, but a 'recognised psychiatric injury' is disputed Where liability for a blameless accident is denied Where fault, other than the use or operation of the vehicle, is denied. As indicated, the CHGs require the Insurer to provide full details of the extent to which each element of liability is denied. For example, the Section 81 Notice might read: We have investigated the circumstances of the accident and determined that our Insured driver was at fault. [Optional paragraphs] [Causation] We deny liability, however, on the grounds that the Insured's fault did not cause the Claimant any injury. We make this allegation because [insert details]. [Late claim] We deny liability, however, on the grounds that the notice of the claim was given late, and the Claimant does not have a full and satisfactory explanation because [insert details]. [Nervous shock] We deny liability, however, on the grounds that the Claimant is not a 'close family member' of the victim and did not witness the victim being killed, injured or put in peril within the meaning of s 30(2) of the Civil Liability Act Deemed Denials of Liability Where the Insurer fails to issue a Section 81 Notice within three months of receiving the Claim Form, s 81(3) is engaged and the Insurer is 'taken to have given notice to the Claimant wholly denying liability for the claim'. Query whether the principle in Smalley still applies and whether these matters remain subject to Mandatory Exemption. Page 3 of 5

4 It is clearly arguable that the words 'expressly denied in writing' in the new form of clause are designed to exclude deemed denials. This is because a deemed denial would ordinarily not constitute an express denial. If this is correct, then a Mandatory Exemption should not result from a deemed denial of liability. There is a risk, however, that a deemed denial of liability will still result in a Mandatory Exemption under clause because s 81(3) provides that the Insurer is 'taken to have given notice wholly denying liability' even though no such express, written notice has been given. Conduct Inconsistent with Express Denials It is doubtful that the new form of clause reverses the decisions of Harrison and Anderson. The former version of clause also made reference to the Insurer's 'written notice'. Despite this reference, the Court still found that a denial contained in the Insurer's Section 81 Notice could be displaced by subsequent conduct such as making s 83 payments and agreeing, in a CARS or MAS Form, that liability was admitted. In our view, the Court is likely to take the same approach notwithstanding the amendment to clause As such, where the Insurer wishes to by-pass CARS and contest liability in Court, it remains important that the Insurer avoids any conduct inconsistent with the denial. Blameless Accidents Under the previous CAGs, it was difficult to have blameless accident claims exempted because fault could not be denied where no fault was alleged. The same problem exists under the new form of clause A matter will not be exempted under clause unless the written notice both expressly denies liability and denies fault. A denial of liability, alone, is insufficient. We remain of the view that the most efficient way to obtain a Mandatory Exemption in blameless accident claims, involving a single vehicle owned by the driver, is to cite clause and deny indemnity to the Claimant in the claim he makes against himself. Exemption in other blameless accident claims remains problematic. Discretionary Exemptions An Application for Discretionary Exemption may still be made if the Insurer wishes to bypass CARS in claims where there are no grounds for Mandatory Exemption. As such, in claims where the Insurer admits fault but denies liability for some other reason (eg causation, procedural issues, or because an allegation of blameless accident is denied), an Application for Discretionary Exemption may still be made. The option of seeking a Discretionary Exemption may also be made where the Insurer has alleged contributory negligence and wishes to have the issue determined by the Court. In these cases, the central issue is whether CARS is an appropriate forum to deal with the dispute or whether the Court has tools available to it which render the Court a better venue. Page 4 of 5

5 Status of CARS Assessments Section 95(2)(a) provides that an Insurer is not bound by a CARS assessment of damages unless it has accepted 'liability under the claim'. Where an Insurer denies liability, and avoids any conduct inconsistent with the denial, it may invoke s 95(2)(a) and decline to pay out on a CARS Assessment. In our view, the new CAGs have no impact upon this argument. Curwoods Lawyers 8 April 2014 Page 5 of 5