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CTP Insurance Case Note |
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| Focus: |
What happens to costs when an insurer rejects a CARS decision? |
| Services: |
Insurance |
| Industry Focus: |
Insurance |
| Date: |
09 July 2008 |
| Author: |
Daniel Hanna, Partner, Sydney |
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Dibbs Abbott Stillman Lawyers restructured on 1 March, 2009.
The Sydney, Brisbane and Canberra offices are now DibbsBarker.
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What happens to costs when an insurer rejects a CARS decision?
This question was considered in a recent District Court decision of Nieweglowski v Navascues, in which Dibbs Abbott Stillman represented the defendant on behalf of Allianz Australia Insurance Ltd.
The claim arose from a motor accident that occurred in a shopping centre car park on 3 April 2004. The defendant was reversing out of the car park and collided with the pedestrian plaintiff. The plaintiff was highly intoxicated at the time, and was later tested with a blood alcohol reading of 0.245. In addition to the intoxication, there was evidence from an independent witness that the plaintiff was looking down at the ground as he walked.
Prior to the CARS assessment, Allianz had admitted a breach of duty of care but alleged contributory negligence of 25%.
Following the CARS assessment hearing on 4 July 2007, Assessor Margaret Holz found that “The issue of the state of the claimant’s sobriety is irrelevant.” She later commented “That allegation is totally unsubstantiated. I would go so far as to comment that there was not a shred of evidence to support the allegation of contributory negligence in the Section 81 Notice, although the allegation was maintained throughout the conference.” She refused to allow any contributory negligence and entered a certificate totalling $249,066.77 plus costs.
The plaintiff accepted the assessor’s decision. Allianz did not. The plaintiff then commenced proceedings in the District Court at Sydney, in which the same issues were raised. Judgment was eventually delivered for the sum of $72,528.80 after a 20% deduction was applied for contributory negligence. This was more than $25,000 lower than an offer of compromise served by the defendant well in advance of the hearing.
In determining the costs issue, Judge Truss considered the provisions of the Motor Accidents Compensation Act that relate to litigation. Her Honour pointed out that the costs outcomes prescribed in s.151 depended on a claimant rejecting a CARS award and proceeding to litigation. There were no provisions setting out what would happen if a claimant accepted a CARS award but an insurer rejected it. The only case available on the issue, San v Rumble (No. 2) (2007) NSW CA 259 was distinguished because in that case, it was the claimant who had rejected the decision, not the insurer.
Because there was no provision to the contrary, Judge Truss stated “I conclude that the rules in relation to offers of compromise apply to this case”.
The plaintiff sought to argue s.153 of the Motor Accidents Compensation Act. Section 153(1) provides “The Court may make an order that departs from those provisions in an exceptional case and for the avoidance of substantial injustice.” Her Honour decided that this section did apply, but she was not persuaded that such circumstances existed. She ordered that the defendant pay the plaintiff’s costs “on an ordinary basis” up to the date of the Offer of Compromise. The plaintiff was ordered to pay indemnity costs to the defendant thereafter.
Summary
When an insurer, not having admitted full liability for a CTP claim, rejects a CARS decision:
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The ordinary court rules concerning litigated costs apply. The effect would be similar to a Section 92 exemption of the entire claim from regulated costs.
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Rules regarding offers of compromise will apply, unless a substantial injustice can be demonstrated under Section 153.
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There is neither a costs penalty nor protection flowing from a verdict that is higher or lower than the assessment.
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When rejecting a CARS decision, it is important for insurers to serve a reasonable offer of compromise early in the proceedings. The consequence for failing to do so is that full, unregulated costs will be payable as though the claim were exempted.
What happens to costs when an insurer rejects a CARS decision?
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Author: Daniel Hanna | Partner | Sydney
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