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AGY v AAMI Insurance [2019] NSWDRS MR 183

NSW DISPUTE RESOLUTION SERVICE (NSWDRS)
JurisdictionMerit Review
CatchwordsDeny liability for statutory benefits – minor injury – medical assessment – psychological injury – physical injury – legal costs – exceptional circumstances – reasonable and necessary – whiplash injury – nervous injury
Legislation cited Motor Accident Injuries Act 2017 (NSW) ss 7.13(4), 8.3(1)(c), 8.3(3), 8.10(3), 8.10(4)(b), Schedule 2 cl 1 (aa)
Motor Accident Injuries Regulation 2017 cl 10(d), 22, Schedule 1 Part 2 Section 2
Motor Accident Guidelines 2017 (as amended on 15 January 2019) cl 7.18.1
Cases citedN/A
Text cited N/A
Parties AGY – Claimant
AAMI Insurance – Insurer 
Disclaimer This decision has been edited to remove all Unique Personal Identification including the name of the Claimant.

Miscellaneous Claims Assessment Certificate

Reasons for Decision

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

Background

1.   AGY was injured in a motor vehicle accident on 24 June 2018.

2.   AAMI Insurance (“the Insurer”) accepted AGY’s claim under the Motor Accidents Injuries Act 2017 (“the Act”).

3.   The Insurer subsequently made a decision, on 12 October 2018, to deny liability for statutory benefits after 26 weeks of AGY’s claim on the basis that she suffered a ‘minor injury’ for the purposes of the Act.

4.   AGY disputed this decision and lodged an application with the Dispute Resolution Service (“DRS”) on 14 November 2018 for a medical assessment in relation to the ‘minor injury’ determination.

5.   Medical Assessor Dr Samuel Lim conducted a medical assessment of AGY’s psychological injury and issued a certificate dated 1 February 2019, finding that AGY’s injury was not a ‘minor injury’ under the Act. Medical Assessor Dr Philip Truskett conducted a medical assessment of AGY’s physical injuries and determined that those injuries were ‘minor injuries’.

6.   AGY’s legal representatives, P.K. Simpson & Co, subsequently issued an invoice to the Insurer dated 8 August 2019 claiming recovery of legal costs of the medical assessment in the amount of $1,796.30 and disbursements in the amount of $688.60.

7.   The Insurer has made payment of the disbursements however declined to make payment of the legal costs in the amount of $1,796.30 by way of letter dated 9 August 2019. This is the ‘reviewable decision’ for the purposes of the Act. The issue in dispute is whether AGY is entitled to recover from the Insurer the legal costs incurred pursuant to section 8.10 of the Act.

8.   AGY 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 for internal review.

9.   AGY lodged her application for merit review with the DRS on 4 September 2019. The application was accepted and falls within the jurisdiction of the DRS as a merit review matter under Schedule 2(1)(aa) of the Act.

Documents considered

10.   I have considered the documents provided in the application and the reply and any further information provided by the parties. I have also considered the following further information:

  • Insurer’s liability notice dated 12 October 2018
  • Insurer’s internal review – Statement of Reasons dated 7 November 2018
  • AGY’s application for medical assessment dated 13 November 2018
  • Medical assessment of Assessor Lim dated 1 February 2019
  • Medical assessment of Assessor Truskett dated 5 July 2019.

Legislation

11.   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 Regulations”)

Submissions

12.   AGY’s legal representatives make the following submissions on her behalf:

a.   AGY’s legal representatives seek payment of regulated professional fees in accordance with Schedule 1, Part 2 of the Regulations, in the amount of $1,633.00 plus GST as well as payment of the associated disbursements in making the application to DRS in the amount of $626.00.

b.   AGY 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 actions of the Insurer.

c.   AGY herself instructed her legal representatives that she did not believe her injuries were minor and disagreed with the Insurer’s determination.

d.   Further, AGY relied upon the medical evidence of Dr Figol, Nepean Hospital, In Control Physiotherapy and Professional Psychological Service in coming to that position. The Insurer failed to obtain this evidence, which contributed to their erroneous decision of a minor injury.

e.   The requisite application to determine whether her injuries were non-minor/minor was made on 13 November 2018. At that juncture it was agreed by AGY that the injuries had not been properly investigated by the Insurer and the records were obtained by the legal representatives to assist the application.

f.   AGY was clearly justified in her application as on 1 February 2019, Dr Samuel Lim determined her injuries were non-minor and overturned the Insurer’s decision.

g.   Therefore AGY submits that the DRS application was reasonable, necessary and justified in the circumstances, as well as it being AGY’s right to have her injuries fully investigated and assessed by a DRS assessor.

h.   Reference is made to correspondence from the Insurer dated 9 August 2019 in which the Insurer advises it is “…we note that there has been no allowance, made by a claims assessor or a court, for costs relating to the subject medical assessment matter”. It is submitted that surely an insurer whom operates with a license in this area would be aware that it is outside the ambit or authority of a Medical Assessor to award costs.

i.   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.

j.   Common sense would dictate that the costs payable under Schedule 1, Part 2, section 2 of the Regulation are incidental to AGY’s legal representative conferring with her prior to drafting the application, perusal and consideration of the relevant medical evidence, drafting submissions, and perusing the DRS medical assessments.

k.   It is also of note that AGY was successful in overturning the Insurer’s decision to determine her injuries as minor.

l.   The work and costs associated with the above exceed the Regulations but are incurred to assist AGY in receiving a fair and just assessment and claims process as a whole.

m.   Therefore, it is submitted that the costs need not be formally awarded by a Claims Assessor, as in medical disputes there isn’t one, and are payable flowing from the receipt, acceptance of the application and furnishing of the medical assessment.

n.   AGY also seeks the costs of this application which has only become necessary due to the ineptitude the Insurer and which has required his legal representative to go to the additional cost to enforce regulated and payable costs that should already have been paid.

o.   AGY therefore claims the initial professional costs of $1,633.00 plus GST and disbursements of $626.00 plus GST in relation to the DRS Assessment, and in addition, the costs of this DRS Merit Review in the amount of $1,633.00 plus GST, totaling $3,892.00 plus GST.

13.   The Insurer submits:

a.   It is noted that there is no longer a dispute regarding the payment of disbursements as sought in AGY’s submissions.

b.   AGY seeks to recover legal costs incurred in connection with a medical assessment dispute.

c.   The Insurer reproduces clause 22 of the Regulations in relation to the fixing of maximum costs recoverable by legal practitioners. The Insurer also reproduces Schedule 1, (2)(1) of the Regulations which provides:

The maximum costs for legal services provided to a claimant or an insurer in connection with a medical assessment under Division 7.5 of the Act, as allowed by the claims assessor or court, are 16 monetary units (to a maximum of 60 monetary units per claim).
d.   The Insurer is of the view that Clause 22 and Schedule 1 of the Regulations fix the maximum costs that a claimant or insurer can incur for legal services provided by a lawyer. In other words, it is the maximum solicitor/client costs that can be incurred by a claimant or insurer.

e.   AGY alleges that she has incurred legal costs in the amount of 16 monetary units or $1,633 in connection with a medical dispute and now seeks to recover such costs from the insurer and has lodged a DRS Application under Schedule 2, 1(aa) to have a Merit reviewer determine the following:

(aa) 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 AGY are reasonable and necessary.
f.   A Merit reviewer is neither a claims assessor or a court and it unclear whether a Merit Review has the power to permit payment of legal costs, incurred by AGY, by the insurer

g.   The Insurer provides an extract of section 8.10 of the Act and submits that it is important to note that the word “legal” is omitted from the Merit Dispute matter under Schedule 2, 1(aa). It is submitted that on one view it may be the intention of the scheme that a Merit reviewer is only empowered to determine “other costs and expenses incurred by the claimant in connection with the claim” including the types of costs and expenses referred to in the last sentence of section 8.10(1) and reasonable and necessary costs and expenses incurred by the claimant in attending any medical examination.

h.   It is submitted that before AGY can recover of legal costs from the insurer, such costs must be incurred in accordance with the Regulation, and section 8.10 must be applied before the DRS can permit AGY to recover costs from the insurer.

i.   The Regulation does not permit the recovery of legal costs incurred by AGY from the insurer but does nothing more that fix the maximum costs for legal services that can be incurred by a claimant or insurer. Section 8.10 permits only AGY to recover such costs from the insurer.

j.   Finally it is submitted that there is clear legislative intention of Schedule 1, 2(1) that costs incurred by AGY or an insurer in connection with a medical dispute can only be allowed by the “claims assessor or court” and arguably restricting recovery of costs on a party/party basis to claims that proceed to a claim for common law damages and assessed by a claims assessor or a court.

k.   In light of the above and in consideration of the available information, the insurer is not satisfied that there are exceptional circumstances to justify the payment of legal costs. The insurer submits that legal costs should not be recoverable for the subject application.

Reasons

14.   The issue in dispute is AGY’s entitlement to legal costs relating to the application for medical assessment of the minor injury dispute.

15.   Section 8.3 of the Act provides for the fixing of maximum costs recoverable by Australian legal practitioners. Section 8.10(1) provides that a claimant for statutory benefits is (subject to that section) entitled to recover from the insurer ‘reasonable and necessary’ costs in connection with the claim. This is qualified by subsections (2), (3) and (4) which provide that the recovery of costs is allowed “if payment of those costs is permitted by the regulations [emphasis added] or the Dispute Resolution Service”.

16.   The Insurer makes a number of submissions in relation to the payment of legal costs in this matter. The Insurer submits that for AGY to be able to recover legal costs, the costs must be incurred accordance with clause 22 of the Regulations and section 8.10 of the Act must be applied before the DRS can permit recovery of the costs.

17.   I do not agree with these submissions of the Insurer. In my view, costs for medical assessments are specifically permitted by the Regulations at Schedule 1, Part 1(2)(1) of the Regulations, which provides:

The maximum costs for legal services provided to a claimant or an insurer in connection with a medical assessment under Division 7.5 of the Act, as allowed by the claims assessor or court, are 16 monetary units (to a maximum of 60 monetary units per claim).

18.   In providing a maximum amount recoverable, the Regulations in my view specifically permit payment of reasonable and necessary legal costs incurred “in connection with a medical assessment”. I note that the regulations do not in any other way ‘permit’ payment of any other type of costs.

19.   The Insurer also submits that the Regulations do nothing more that fix the maximum costs for legal services that can be incurred by a claimant or insurer and that the use of the words “claims assessor or court” arguably restricts recovery of costs on a party/party basis to claims that proceed to a claim for common law damages and are assessed by a claims assessor or a court. I note however that the words “claims assessor or court” are omitted from the disputes outlined at Schedule 1, Part 1, 2(2) & (3) and Schedule 1, Part 1, 2(4) provides that “the maximum costs set out in subclauses (2) and (3) are in addition to the maximum costs set out in subclause (1)”. If the Insurer’s interpretation is correct, Schedule 1, Part 1, 2(2) & (3), In my view, would also include the words “claims assessor or court”.

20.   Further I note that section 8.3(1)(c) of the Act provides that the Regulations may make provision with respect to declaring that no costs are payable for any such legal services or other matters of a kind specified in the Regulations. I consider, that if it was the intention of the scheme that costs are not recoverable in relation to medical assessment matters that do not proceed to a claim for common law damages, this could have been specified in the Regulations.

21.   For the above reasons, I do not accept the submissions of the Insurer that costs of medical assessment matters are not permitted unless the matter proceeds to a claim for common law damages.

22.   The Insurer also refers to Schedule 2, (1)(aa) of the Act and submits that a merit reviewer is neither a claims assessor or a court and it unclear whether a merit reviewer has the power to permit payment of legal costs, incurred by the claimant, by the insurer.

23.   I note that the DRS has jurisdiction to determine disputes arising in relation to costs as merit review matters under Schedule 2, clause 1(aa), which outlines the dispute as follows:

hether 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.

24.   Accordingly, in matters where there is a dispute between parties about whether the costs and expenses incurred are reasonable and necessary, for the purpose of recovery of such costs, the DRS has jurisdiction to determine such disputes as merit review matters.

25.   As a Claims Assessor, duly appointed, I am satisfied that I have jurisdiction to determine the dispute and to assess AGY’s legal costs in respect of the medical assessments.

26.   It should be noted that the above provision does not, nor does any other provision under the Act, work to prevent an insurer from agreeing to pay costs in matters in which it accepts it is liable to pay costs. Similarly, there is no provision in the Act or the Regulations which states that costs cannot be agreed to or paid without a costs order.

27.   As noted above, section 8.3(3) provides that costs are recoverable if permitted by the Regulations or the DRS. I am satisfied on the reasons outlined above, that the Regulations permit costs in medical assessment matters. In this case an “allowance made by a claims assessor or court”, as submitted by the Insurer in its letter dated 9 August 2019, is not necessary for an insurer to agree to pay the reasonable and necessary costs of a claimant.

28.   It is also important to note that Insurers refusing to consider payment of legal costs, resulting in further disputation, falls contrary to the objects of the Act particularly that at section 1.3(2)(g): “to encourage the early resolution of motor accident claims and the quick, cost effective and just resolution of disputes”. This object is reiterated at clause 7.18.1 of the Guidelines.

29.   The Insurer also makes submissions in relation to not being satisfied that AGY has exceptional circumstances to justify payment of legal costs and that legal costs should not be recoverable for the subject application. Given that I am satisfied that the Regulations permit payment of legal costs of medical assessments at Schedule 1, Part 1, clause 2, I do not consider I am required to rely on sub-section 8.10(4)(b) of the Act, relating to exceptional circumstances, in this matter.

Reasonable and Necessary Costs

30.   Having established that the costs of medical assessments are recoverable, I will proceed to assess AGY’s reasonable and necessary legal costs in respect of the medical assessment. Sub- clause (1) of Schedule 1, Part 1, clause 2 of the Regulations limits costs in connection with medical assessments to 16 monetary units.

31.   I am required, pursuant to the jurisdiction conferred by Schedule 2, clause 1(aa) of the Act (above), to determine the quantum of the maximum costs I consider appropriate. It is open to me to permit any amount of costs up to the maximum amount, including nil.

32.   AGY was involved in a motor vehicle accident on 24 June 2018 when another car ran a red light and collided with her vehicle. The information before me indicates that AGY’s car was written off and she was hospitalised and discharged the following day.

33.   I have AGY’s Application for Personal Injury Benefits form before me dated 4 July 2018. AGY listed her injuries from the accident as: “neck, right arm, right shoulder, right hand, left arm, left shoulder, chest, back, right leg, left leg, nervous shock”.

34.   The Insurer issued a ‘Liability Notice – Benefits after 26 weeks’ on 12 October 2018 declining liability for statutory benefits after 26 weeks of AGY’s claim on the basis that her physical injuries had been determined as ‘minor injuries’ under the Act. The Insurer relied on one medical certificate issued by AGY’s General Practitioner dated 13 July 2018 and two Allied Health Recovery Request forms completed by AGY’s physiotherapist. The Insurer’s reasons for the decision was limited to the following:

The above information indicated that you sustained the following injuries in the motor accident:
  • Whiplash injury to neck.
Given these diagnoses, we have determined that you have sustained “minor injuries”.

35.   I note that the Insurer did not refer to AGY psychological injury at all, which she had described as ‘nervous shock’ in the Application for Personal Injury Benefits form. The Insurer indicates in its notice that this document was considered for the determination of fault. It appears that the Insurer may not have considered the psychological injury due to the diagnosis provided by the medical practitioner on the medical certificate of “whiplash type injury to neck” however I note that the medical certificate dated 4 July 2018 by Dr Nestor Figol notes “anxiety when drives car” on page 2.

36.   In its internal review decision dated 7 November 2018, the Insurer provides more detailed reasons in support of its decision to affirm the determination regarding minor injury. The Insurer however again did not consider AGY’s psychological injury although the decision provides a summary of the Application for Personal Injury Benefits form and outlines the injuries listed by AGY including ‘nervous shock’. Reference is made to Dr Figol’s medical certificate however not to the psychological symptom noted by Dr Figol.

37.   AGY then proceeded to make an application to DRS for a medical assessment in respect to the dispute regarding minor injury. The application is prepared by AGY’s legal representatives and includes a number of attachments and submissions of approximately one and a half pages. AGY’s legal representatives list her injuries including a “psychological injury” and refer to medical records from Nepean hospital, Professional Psychology Services and In Control Physiotherapy which the Insurer failed to obtain and consider before making it’s decision. It is submitted that AGY’s injuries are not ‘minor’ and that “…it is an unreasonable and improper practice to determine a injuries [sic] as minor due to a failure to obtain all relevant medical evidence”.

38.   As outlined above, the disputes were referred to Assessor Lim and Assessor Truskett. Assessor Lim determined that AGY suffered from Post Traumatic Disorder and that her psychological injury was not a ‘minor injury’ under the Act. Assessor Truskett determined that AGY’s physical injuries were ‘minor injuries’ under the Act.

39.   Accordingly, the Insurer’s decision to deny liability on the basis that AGY suffered ‘minor injuries’ was incorrect as her psychological injury was determined as ‘non-minor’.

40.   AGY makes a number of submissions in relation to why the application for medical assessment was necessary. She refers to the Insurer’s failure to obtain all relevant medical records before making it’s decision in relation to minor injury, and relies on the medical records from Dr Figol, Nepean Hospital, In Control Physiotherapy and Professional Psychological Service which she submits indicates that the Insurer’s decision was erroneous. I note that the Insurer subsequently made payment of these disbursements.

41.   When considering whether the legal costs incurred by AGY in making the application for medical assessment was ‘reasonable and necessary’, I agree with these submissions made by AGY. On the information before me, outlined above, the Insurer relied on minimal information when making its decision in relation to minor injury and failed to obtain medical records available at the time, including from Professional Psychological Service. The Insurer did not address in either of its decisions AGY’s psychological injury, despite AGY claiming this injury in the Application for Personal Injury Benefits form and the medical certificate noting anxiety when AGY drives.

42.   Having regard to the application for medical assessment and the work that AGY’s legal representatives have put into the application including obtaining the medical records noted above, the level of submissions/reasons provided and overall consideration put into the application, I consider the costs claimed of $1,796.30 (inclusive GST) reasonable and necessary.

43.   Further, the success of the application must also be considered with respect to the psychological injury. If the Insurer failed to properly investigate the injuries and fell into error in its original decision, I do not consider AGY should bear the costs of such an error and having to bring the dispute to the DRS.

44.   Applying my discretion and experience, I consider it appropriate to allow the maximum costs (at the time of the invoice) of 16 monetary units of $1,633.00.

45.   Accordingly, I allow costs in the amount of $1,796.30 (inclusive of GST) in respect to the application for medical assessment dated 13 November 2018.

Legal Costs

46.   AGY also seeks to recover the legal costs of this application for merit review, in the amount of $1,633.00 plus GST and submits that the application has only become required due to the actions of the Insurer.

47.   I note that the Act provides at section 8.10(3) 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. Subsection (4) of 8.10 provides that DRS can permit legal costs if AGY is under a legal disability or there are exceptional circumstances to justify payment of legal costs.

48.   Legal costs associated with disputes in relation to costs under Schedule 2, clause 1(aa) are not permitted by the Regulations. In respect to whether there are exceptional circumstances, I acknowledge the submissions in relation to the necessity to bring the application due to the actions of the Insurer however I do not consider this satisfies as ‘exceptional circumstances’, being the common reason claimants make applications in respect to legal cost disputes.

49.   Pursuant to section 8.10(3) of the Act, I find that the legal costs of the subject application is not recoverable.

Determination

50.   The Insurer’s reviewable decision made on 9 August 2019 is set aside and the following decision is made in substitution of the reviewable decision:

The Insurer is to pay AGY’s legal costs in the amount of $1,796.30 in respect to the application for medical assessment dated 13 November 2018.

51.   Effective date: This determination takes effect on 25 October 2019.

52.   Legal Costs: The legal costs of the subject application is not recoverable in accordance with section 8.10(3) of the Act.

Tajan Baba
Merit reviewer and Claims Assessor
Dispute Resolution Service