Mr Gudelj was injured in a motor vehicle accident on 21 May 2006. He lodged a personal injury claim form with CTP insurer NRMA on 27 October 2008. NRMA rejected the claim on grounds that the explanation for its delay was not full and satisfactory.
Mr Gudelj then applied for an assessment under section 96(1)(a) of the Act. The CARS officer accepted that Mr Gudelj’s explanation was full but found that it was not satisfactory. She rejected the late claim.
Concurrent with his section 96 application, Mr Gudelj lodged a CARS general assessment application pursuant to section 94, seeking discretionary exemption of the claim on grounds that liability was deemed denied pursuant to NRMA’s refusal to issue a section 81 notice.
The CARS PCA observed that pursuant to section 73(3)(c) a late claim could not be referred for a CARS assessment unless there was a full and satisfactory explanation for delay or unless the referral was for an exemption application. The PCA interpreted the latter provision as applying to a mandatory exemption only. Accordingly the PCA declined to permit assessment of a discretionary exemption.
Mr Gudelj commenced Supreme Court proceedings. On 14 May 2010 his Honour McDougall J disagreed with the PCA’s interpretation of section 73(3)(c). He found that the section permits referral for assessment of mandatory or discretionary exemptions. Accordingly, Mr Gudelj was permitted to lodge an application for a discretionary exemption. If that exemption was provided he would be able to re-visit the rejected full and satisfactory explanation in court. However, his Honour reached a further decision that precluded further exploration of Mr Gudelj’s claim. His Honour determined that because the insurer had not accepted the claim it was not required to issue a section 81 certificate. Therefore there was no ‘deemed denial’. This potentially deprived Mr Gudelj of a ground for exemption.
Mr Gudelj appealed to the Court of Appeal. Their Honours Giles JA, Hodgson JA and Handley AJA published a unanimous judgment on 24 June 2011.
Their Honours held that a section 96 certification that a late claim explanation is not full and satisfactory will not preclude access to court. Section 73(3)(c) permits the claim to be referred for a mandatory or discretionary exemption application. On this point their Honours concurred with McDougall J.
The Court of Appeal diverged from McDougall J’s opinion on the issue of whether, in circumstances where an insurer denies liability because of a claimant’s non-compliance with procedural obligations, an insurer is obliged to issue a section 81 notice.
The Court of Appeal determined that an insurer’s obligation to issue a section 81 notice remains live when it denies liability on procedural non-compliance grounds. A written rejection of a claim citing procedural non-compliance will serve as a notice denying liability for section 81 purposes. Alternatively, if in the face of procedural non-compliance an insurer refuses to issue a notice addressing liability, a deemed denial will arise.
The Court of Appeal referred Mr Gudelj’s exemption application back to the PCA. Whilst acknowledging that the exemption application rested with the PCA’s discretion, the Court opined that in the circumstances a discretionary exemption would be well founded.
Implications for Insurers
The consequences of the Court of Appeal’s findings are relatively simple, but also significant.
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The Court acknowledged that denial of liability resting on procedural issues, as opposed to a denial of fault, does not enliven a mandatory exemption and is not listed as a basis for discretionary exemption. However the Court opined that a denial of liability of this nature is a factor that that ought to militate in favour of a discretionary exemption.
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Procedural non-compliance by a claimant does not justify an insurer’s non-compliance with section 81. Whether the procedural non-compliance relates a claim’s lateness (section 73), an incomplete claim form (section 73) or a failure to report to police (section 70), the insurer is obliged to comply with the provisions of section 81.
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A failure to issue a notice in compliance with section 81 will generate a deemed denial, irrespective of a procedural non-compliance allegation.
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A letter denying liability on grounds of non-compliance will serve section 81. An insurer can admit fault but deny liability on grounds of procedural non-compliance; in this circumstance a discretionary exemption from CARS can be pursued. Alternatively, an insurer can deny fault and deny liability on compliance grounds, thereby enlivening a mandatory exemption.
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Where a section 96 certificate in relation to a late claim is issued and:
o it is adverse to the claimant, the claimant can seek a mandatory or discretionary exemption.
o it is adverse to the insurer, the insurer can continue to deny liability on procedural grounds. If the denial of liability is accompanied by denial of fault, a mandatory exemption can arise. If the denial of liability is accompanied by admission of fault, a discretionary exemption might arise. In these circumstances it is important that the insurer’s section 81 notice admits the fault of its insured driver in causing the accident but denies liability due to the failure to comply with statutory provisions.
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If a claimant obtains a section 96 certificate and the claim proceeds to a CARS General Assessment of damages, denial of liability on procedural grounds permits the insurer to refuse to pay the award assessed at the General Assessment. After issuance of the section 94 certificate the claimant can commence court proceedings.
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If a matter proceeds to court after an exemption or after issuance of a section 94 certificate, and the insurer wishes to press the late claim dispute, it must file an appertaining Notice of Motion within 2 months of service of the Statement of Claim (section 73(6)).
For further information, please contact a member of our Insurance team:
T +61 2 8233 9717
F +61 2 8233 9555
Matthew Seisun | Senior Associate
T +61 2 8233 9716
F +61 2 8233 9555
