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AEG v AAI Limited trading as GIO [2019] NSWDRS MR 110

Overview

Jurisdiction: Merit Review

Catchwords: Minor injuries – entitlement to legal costs and disbursements – try on – medical assessment – reasonable and necessary costs – legal costs for medical assessment

Legislation cited:

  • Motor Accident Injuries Act 2017 (NSW) ss 1.34, 3.1, 3.24, 6.5, 7.131.6, 6.3, 7.13, 8.3, 8.10, Schedule 1, Schedule 2
  • Motor Accident Injuries Regulation 2017 Schedule 1
  • Motor Accident Guidelines 2017 (as amended on 15 January 2019)Motor Accident Guidelines effective 13 July 2018
  • Work Health and Safety Act (NSW) 2011

Parties:

  • AEG – Claimant
  • AAI Limited trading as GIO – Insurer

Disclaimer: This decision has been edited to remove all unique personal identification including the name of the claimant.

Merit review certificate

View here

Issued in accordance with section 7.13(4) of the Motor Accident Injuries Act 2017 Schedule 2, clause 1(aa) of the Motor Accident Injuries Act 2017

  • Claimant:AEG
  • Insurer:AAI Limited trading as GIO
  • Applicant:AEG
  • Date of Accident:19 December 2017
  • DRS Reference:10080843
  • Insurer Claim Number:Y052763008
  • Decision Maker:Tajan Baba
  • Date of Certificate:26 April 2019

Tajan Baba
Merit Reviewer and Claims Assessor
Dispute Resolution Service


Reasons for decision

Issued in accordance with section 7.13(4) of the Motor Accident Injuries Act 2017

Background

1. AEG was injured in a motor vehicle accident on 19 December 2017.

2. AAI Limited trading as GIO (“the Insurer”) accepted AEG’s claim under the Motor Accidents Injuries Act 2017 (“the Act”).

3. The Insurer determined AEG’s injuries as ‘minor injuries’ under section 1.6 of the Act. AEG disputed this decision and the matter was referred for a medical assessment by Assessor Sophia Lahz. On 6 September 2018, Assessor Lahz assessed the injuries as minor injuries for the purpose of the Act.

4. AEG’s legal representatives, PK Simpson & Co, subsequently claimed legal costs in connection with the medical assessment in the amount of $1,600.00 and disbursements of $236.00 (not including GST), from the Insurer by way of letter dated 24 October 2018.

5. The Insurer declined to make payment of the invoice in a letter to AEG’s legal representatives dated 6 December 2018, on the basis that there was no entitlement to legal costs. This is the ‘reviewable decision’ for the purposes of the Act.

6. The issue in dispute is whether AEG is entitled to recover from the Insurer the legal costs incurred pursuant to section 8.10 of the Act, and if so, the quantum of those costs.

7. AEG did not seek an internal review by the Insurer of the reviewable decision and I note that clause 10(d) of the Regulations excludes disputes arising under section 8.10 of the Act from the requirement of internal review.

8. AEG lodged his application for merit review with the Dispute Resolution Service (“DRS”) on 1 March 2019. The application was accepted by the DRS. The dispute is subject to merit review under Schedule 2(1)(aa) of the Act.

Documents considered

9. I have considered the documents provided in the application and the reply and any further information provided by the parties. I have also considered AEG’s application for medical assessment and the medical assessment certificate of Assessor Lahz dated 6 September 2018.

Submissions

10. AEG submits:

  • The legal costs and disbursements incurred were reasonable and necessary because of the Insurer’s failure to obtain all the relevant treating records prior to determining whether the injuries were non-minor. Reference is made to the internal review decision and the internal reviewer not possessing the physiotherapist’s and chiropractor’s clinical notes.
  • Also, the laceration to his forehead and aggravation of degenerative changes in his spine were injuries that were arguably (and still are) outside the definition of minor, although it is accepted in this matter that Dr Lahz did not agree with this position.
  • Notwithstanding that the decision was made by a lay person at the Insurer with no medical training which puts him in a difficult position to accept the determination without an assessment by a medical professional. The application was justified in the circumstances as well as it being his right to have his injuries fully investigated and assessed by a DRS Assessor.
  • He only seeks to recover the reasonable and necessary costs incurred which is permitted under Schedule 1, Part 2, section 2 of the Regulation at a maximum of $1,600.00.
  • The refusal to pay regulated legal costs in this matter is a “try on” by the Insurer to subvert the Act and the Regulation to their own benefit.
  • The costs payable under the Regulation are incidental to his legal representative conferring with him prior to drafting the application, perusal and consideration of the relevant medical evidence, drafting the application, review of the medical assessment and conferring with him on the prospects of success. The costs associated with this work exceed the regulation but were incurred by him to receive a fair and just assessment and claims process on the whole.
  • He also claims the costs of this merit review in the full amount of $1,633.00 plus GST, as the application has only become required due to the “ineptitude of the insurer” which has required his legal representative to go to the additional cost to enforce regulated and payable costs that should already have been paid.
  • He therefore claims the initial costs of $1,600.00 plus GST and disbursements of $236.00 plus GST in relation to the DRS Assessment and in addition and the costs of this DRS Merit Review in the amount of $1,633.00 plus GST, totaling $3,469.00 plus GST.

11.The Insurer submits:

  • By operation of section 8.10(3) of the Act, AEG is entitled to recover legal costs in relation to a claim for statutory benefits if such costs are permitted by the regulations or the DRS. Section 8.3(4) provides that AEG’s lawyers are not entitled to be paid or recover legal costs unless such costs are permitted by the regulations or the DRS.
  • The Insurer is unable to pay any costs for legal services because there is no mechanism permitting such costs unless allowed by a claims assessor or a court.
  • The Insurer has attempted to engage with AEG’s lawyer and outline that AEG is not permitted by the Regulations to recover costs for legal services by operation of Schedule 1, Clause 2(1) of the Regulations.
  • The Insurer submits that AEG has the onus of complying with section 8.10(4) and until AEG satisfies DRS that there are exceptional circumstances in existence to justify the payment of legal costs, it is unable to pay such claim for legal services.
  • Reference is made to Schedule 1, Part 1 of the Regulations which prescribes the maximum costs allowed for each dispute.
  • It is noted that costs for legal services in connection with a medical assessment are not payable by an insurer unless “allowed by a claims assessor or court”. The Insurer submits that the reason for the insertion of these words is that the medical assessment matters declared under Schedule 2, clause 2(a) to (e) are medical questions answered by medical assessors appointed by SIRA and do not require any legal submission or persuasion to assess any of the medical dispute matters under the scheme.
  • To allow costs for legal services for a medical dispute is contrary to the objects of the scheme, primarily to keep premiums affordable by reducing scheme costs.
  • The Insurer does not submit that the provisions in the Regulations in relation to maximum costs for legal services have no application at all. Such costs may be allowed where a claim proceeds to the assessment of damages under Division 7.6. This is consistent with the intention of the scheme.
    • The Insurer outlines its understanding of how medical disputes proceed in the new scheme, based on the intention of the scheme and submits that claimants may retain lawyers for the purposes of providing submission to the proper officer that the Medical Assessment was incorrect in a material respect. It is submitted that it is only at this point that the Insurer is liable to pay costs for legal services for the subject medical dispute by operation of Schedule 1 of the Regulations.
  • The Insurer submits that AEG does not have exceptional circumstances to be allowed costs in connection with the dispute regarding minor injury. The Insurer assisted AEG throughout the process and advised in relation to his rights. For AEG to engage lawyers to complete the application form for the medical dispute is not reasonable and necessary legal services because there is no requirement and perhaps not necessary to make legal submissions to a medical assessor who is appointed to provide a medical answer. Therefore, there is no exceptional circumstances to justify recovery of legal costs.
  • The Insurer also denies that AEG has suffered any injustice, undue economic hardship or has been left in some way without any assistance. The Insurer takes its duties and obligations under the Act seriously and understands its duties to act with good faith, including section 6.3(d) to advise claimants of their rights of review, to assist the claimant following the internal review decision. The Insurer denies that there was in any way a disproportionate power between the Insurer and the claimant.
  • In respect to the costs of the subject DRS application, the Insurer submits that AEG has not provided any exceptional circumstances to justify the incurrence of costs for the completion of the application by his lawyers. There should be no allowance for costs for the subject merit review matter.

Legislation

12. In conducting my review I have considered the following legislation and guidelines:

  • Motor Accident Injuries Act 2017 (NSW) (“the Act”)
  • Motor Accident Guidelines 2017 (as amended on 15 January 2019) (“the Guidelines”)
  • Motor Accident Injuries Amendment Regulation 2017 (NSW) (“the Regulation”)

Reasons

13. The issue that is in dispute before me is AEG’s entitlement to legal costs relating to the medical assessment of Assessor Lahz.

14. Section 8.3 of the Act provides for the fixing of the maximum costs recoverable by Australian legal practitioners. Sub-section (4) provides that practitioners are not entitled to be paid legal costs for services provided to a party to a claim for statutory benefits unless those legal costs are permitted by the Regulations or the DRS.

15. The costs application before me has been referred as a merit review matter under Schedule 2, clause 1(aa), which outlines the issue as follows:

whether for the purposes of section 8.10 (Recovery of costs and expenses in relation to claims for statutory benefits) the costs and expenses incurred by the claimant are reasonable and necessary.

16. Section 8.10(1) provides that a claimant for statutory benefits is entitled to recover from the insurer ‘reasonable and necessary’ legal costs incurred in connection with the claim. However, section 8.10(1) is qualified by subsections (2), (3) and (4) which provide that the recovery of costs is allowed if payment is permitted by the Regulations or the Dispute Resolution Services.

17. The Insurer makes submissions in relation to AEG having the onus to establish exceptional circumstances to recover costs. I do not however consider that I am required to rely on sub-section 8.10(4)(b) of the Act in this matter as costs for medical assessments are provided for in the Regulations at Schedule 1, Part 1, clause 2. For this reason, I also do not accept the Insurer’s submission that allowing costs for legal services for a medical assessment is contrary to the objects and intention of the scheme. In my view, the Regulations specifically provide to allow costs in these disputes.

18. Sub-clause (1) of Schedule 1, Part 1, clause 2 of the Regulations limits these costs to 16 monetary units.

19. The Insurer also submits that that there is currently no mechanism for the costs claimed by AEG to be awarded under the Regulations as a medical assessor does not have the power to make a costs orders, only a ‘claims assessor or court’ has this power under Schedule 1, Part 1, Clause 2 of the Regulations.

20. The Insurer submits that the insertion of the words ‘claims assessor or court’ is in line with the intention of the scheme to not provide for costs of medical assessments and that the Insurer is liable to pay costs for legal services only relating to applications for a review of a medical assessment by a proper officer under Schedule 1 of the Regulations. I note however that subclause (1) specifically refers to costs of medical assessments and subclause (3) separately relates to costs “in connection with a review of a medical assessment”.

21. Further, as noted above, jurisdiction for this matter is conferred by Schedule 2, clause 1, sub-clause (aa) of the Act as a merit review matter. I accept that the Regulations do not permit a Merit Reviewer to review this matter. However, Claims Assessors can exercise such a discretion. As a Claims Assessor, duly appointed, I am satisfied that I have jurisdiction to determine this dispute and to assess AEG’s legal costs in respect of the assessment by Assessor Lahz.

22. Given that I have established that I have jurisdiction, I will proceed to assess AEG’s reasonable and necessary legal costs in respect of the medical assessment, by considering the proportion of the maximum costs of 16 monetary units under Schedule 1, Part 1, clause 2 of the Regulations that I consider appropriate.

23. Given that it is open to me as a reviewer to permit any amount up to the maximum amount of costs that can be permitted, including nil, I am required to assess the merits of the application to determine what amount I consider appropriate.

24. In making my assessment, I must have regard to the objects of the Act. Section 1.3(g) provides that one of the objects is “to encourage the early resolution of motor accident claims and the quick, cost effective and just resolution of disputes”.

25. AEG’s application for medical assessment by Assessor Lahz was not successful. In a certificate dated 6 September 2018, Assessor Lahz determined that AEG’s injuries were minor injuries for the purposes of the Act. The Insurer’s reviewable decision was therefore affirmed.

26. The Insurer makes a number of submissions in relation to the assistance it provided to AEG throughout the process and submits that the legal assistance AEG received to “complete the application form” was not reasonable and necessary because there is no requirement, and perhaps it is not necessary, to make legal submissions to a medical assessor who is appointed to provide a medical answer.

27. AEG submits that the application was necessary because of the Insurer’s failure to obtain all the relevant treating records in making the decision regarding minor injury and because the decision was made by a lay person with no medical training. This put him in a difficult position to accept the determination without an assessment by a medical professional. AEG also refers to his right to have his injuries fully investigated and assessed by a DRS Assessor.

28. On review of AEG’s application for medical assessment dated 27 July 2018, I note that AEG’s legal representatives make four submissions on his behalf. The submissions are not extensive, less than half a page in total, and predominately relate to an aggravation of AEG’s degenerative changes at his cervical spine and a laceration AEG suffered to his face, submitting that these injuries fall outside of the definition of minor injury. The final submission refers to the Insurer’s internal reviewer not having a copy of the physiotherapist’s clinical assessment and treatment notes and it is submited that the Insurer has failed to fully investigate the depth of AEG’s injuries and treatment in coming to the determination.

29. Further to the legal costs of the medical assessment AEG seeks in the amount of $1,600.00 plus GST, AEG also seeks recovery of the costs of the following disbursements for which I have invoices before me:

  • Clinical Notes from St George Hospital - $33.00
  • Clinical Notes from The Holy Family Medical Centre - $114.40
  • Police Report - $89.20

30. AEG seeks a total of $1,838.00 plus GST for costs in respect to the application for medical assessment.

31. The application for medical assessment includes a number of attachments, including the clinical notes and police report listed above, however it is not clear and AEG’s legal representatives fail to advise and link how the documents attached are relevant to the application and submissions made in relation to minor injury.

32. The same documents and a number of further documents are attached to this application for merit review in relation to costs of that assessment. The relevance of some of the documents to a dispute in relation to costs is also not clear and AEG’s legal representatives fail to explain how the documents are relevant. AEG’s legal representatives also do not, further to the submission in relation to the internal reviewer not having the Physiotherapist’s and Chiropractor’s clinical notes, make submissions in relation to why the costs incurred for the disbursements listed above were ‘reasonable and necessary’ pursuant to section 8.10(1) of the Act

33. I do however acknowledge the submissions of AEG and acknowledge that there was some uncertainty in relation to whether AEG’s aggravation to his degenerative changes and the laceration to his face fell within the definition of minor injury under the Act. I acknowledge that determinations in this respect can involve technical medical considerations and expertise and that the prospects of success of the application may not have been necessarily apparent to AEG’s legal representative. I also acknowledge AEG’s submissions in relation to the minor injury decision being made by a person with no medical training at the Insurer.

34. Considering this, and more so that the application for medical assessment was made at relatively early stages of a new scheme when the understanding and precedents in relation to minor injury are developing and commonly still being tested, I consider it reasonable in the circumstances that AEG proceeded with his application for an assessment by a medical assessor. This is also particularly when consideration is given to the legal consequences that a decision in relation to minor injury has on AEG’s future entitlement to benefits under the Act.

35. Given that I am satisfied that costs other than nil are reasonable in this matter, I must now determine the quantum of costs I consider appropriate.

36. AEG seeks legal costs in the amount of $1,600.00 plus GST. I do not have an invoice for these costs before me. AEG’s legal representatives submit that this relates to conferring with AEG prior to drafting the application, perusal and consideration of the relevant medical evidence, drafting the application, review of the medical assessment and conferring with AEG on the prospects of success.

37. Applying my discretion and experience, on review of the application for medical assessment prepared by AEG’s legal representatives and having regard to the level of submissions/reasons provided and overall consideration put into the application, I consider it appropriate to allow legal costs of $600.00.

38. For the reasons noted above, in particular the early stages of the scheme and some of the technical medical matters involved in this dispute, I allow recovery of costs for the disbursements in the total sum of $236.60 in this instance. I note however, that for future matters, I consider it imperative that legal representatives outline why they considered such costs were ‘reasonable and necessary’ to be incurred, in order for these costs to be permitted.

39. Accordingly, I allow costs in the total sum of $836.60 ($600.00 in legal costs + $236.60 in disbursements) in respect to the application for medical assessment.

40. AEG also claims the costs of this merit review in the amount of $1,633.00 plus GST. As noted above, subsection (3) of section 8.10 of the Act provides that necessary and reasonable costs are recoverable in respect to disputes in connection with statutory benefits only if it is permitted by the Regulations or DRS. The Regulations do not permit costs for disputes relating to legal costs.

41. Subsection (4)(b) of 8.10 provides that DRS can permit legal costs if there are exceptional circumstances to justify payment of legal costs. AEG has not specifically sought that I apply my discretion under this subsection. AEG has made submissions in relation to the “ineptitude” of the Insurer. In the event that AEG had made an application, I would not be not satisfied that the information submitted supports that there are exceptional circumstances to justify payment of legal costs. I find that legal costs are not recoverable for this application.

Determination

42. The Insurer’s reviewable decision dated 6 December 2018 is set aside and the following decision is
made in substitution of the reviewable decision:

  • The Insurer is to pay AEG’s legal costs and disbursements in the total sum of $836.60 in respect to the medical assessment of Assessor Lahz dated 6 September 2018.

43. The amount of AEG’s costs on this application assessed in accordance with the Motor Accident Injuries Regulation 2017 is $nil inclusive of GST.

Tajan Baba
Merit Reviewer and Claims Assessor
Dispute Resolution Service