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AHZ v Allianz Australia Insurance Limited [2019] NSWDRS MR 213

NSW DISPUTE RESOLUTION SERVICE (NSWDRS)
Jurisdiction Merit Review
CatchwordsLegal costs – medical assessment – minor injury – medical assessment – merit review matter – regulated professional fees – try on – exceptional circumstances – reasonable and necessary costs
Legislation cited Motor Accident Injuries Act 2017 (NSW) ss 1.6, 7.13(4), 8.3(1)(c), 8.3(5), 8.10(3), 8.10(4), Schedule 2 clause 1 (aa)
Motor Accident Injuries Regulation 2017 reg 10(d), Schedule 1 Part 2
Motor Accident Guidelines 2017 
Cases cited

N/A

Text cited N/A
Parties AHZ – Claimant
Allianz Australia Insurance Limited – Insurer 
Disclaimer This decision has been edited to remove all Unique Personal Identification including the name of the Claimant.

Merit Review Certificate

Reasons for Decision

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

Background

1.   AHZ was injured in a motor vehicle accident on 29 June 2018.

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

3.   The Insurer subsequently made a decision to decline liability for statutory benefits after 26 weeks of AHZ’s claim on the basis that his injuries had been determined as ‘minor injuries’ under the Act.

4.   AHZ disputed this decision and lodged an application with the Dispute Resolution Service (“DRS”) on 17 December 2018 for a medical assessment in relation to the ‘minor injury’ determination. Medical Assessor Nel Wijetunga conducted the medical assessment and issued a certificate dated 26 February 2019, finding that AHZ’s injuries were ‘minor injuries’ for the purposes of the Act.

5.   AHZ’s legal representatives, P.K. Simpson & Co, subsequently issued an invoice to the Insurer dated 9 April 2019 claiming recovery of legal costs of the medical assessment in the amount of $1,796.30.

6.   The Insurer declined to make payment of the invoice to AHZ’s legal representatives by way of email 12 April 2019. This is the ‘reviewable decision’ for the purposes of the Act. The issue in dispute is whether AHZ is entitled to recover from the Insurer the legal costs incurred pursuant to section 8.10 of the Act.

7.   AHZ 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.

8.   AHZ lodged his application for merit review with the DRS on 3 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

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 AHZ’s application for medical assessment dated 17 December 2018 and the medical certificate of Assessor Wijetunga dated 26 February 2019.

Legislation

10.   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

11.   AHZ’s legal representatives make the following submissions on his behalf:

a.   AHZ’s legal representatives seek payment of regulated professional fees in accordance with Schedule 1, Part 2 of the Regulations, in the amount of $1,600.00 [sic] plus GST.

b.  HZ 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 reprehensible behaviour of the Insurer.

c.   AHZ himself instructed his legal representatives that he did not believe his injuries were minor and disagreed with the Insurer’s determination and the lack of investigation by the Insurer. AHZ came to this position due to the Insurer’s failure to obtain all the relevant treating records prior to determining whether the injuries were minor. This is demonstrated by the internal review where the Insurer advises that it has relied upon the available medical evidence despite the medical records of the treating GP and physiotherapist not being obtained.

d.   Notwithstanding that the determination was made by a lay person with no medical training which puts AHZ in a difficult position to accept the Insurer’s determination without an assessment by a qualified medical professional or with all the pertinent medical evidence available. 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 Medical Assessor, who can provide a clear diagnosis in accordance with section 1.6.

e.   Reference is made to the Insurer’s email dated 12 April 2019 in which the Insurer advises it is “unable to satisfy the supplied invoice until the necessary order as to costs is provided”. 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.

f.   It is further submitted that 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 via a wording technicality. All other insurers dealt with have promptly made payment, without taking issue, as is the intention of the Act.

g.   Common sense would dictate that the costs payable under Schedule 1, Part 2, section 2 of the Regulation are incidental to AHZ’s 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 AHZ on the prospects of review of the assessment.

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

i.   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.

j.   AHZ also seeks the costs of this application which has only become necessary due to the actions of 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.

k.   AHZ therefore claims the initial professional costs of $1,633.00 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 $3,266.00 plus GST.

12.   The Insurer submits:

a.   The Insurer is unable to pay any costs for legal services given that there is no mechanism permitting such costs unless allowed by a Claims Assessor or a court. Pursuant to section 8.10(4) the DRS can permit payment of legal costs incurred by a claimant but only if satisfied that:
(a)  the claimant is under a legal disability, or

(b)   exceptional circumstances exist that justify payment of legal costs incurred by the claimant.

b.   AHZ has the onus of complying with section 8.10(4) and until AHZ satisfies DRS that there are exceptional circumstances in existence to justify the payment of legal costs, it is unable to pay such a claim for legal services.

c.  It is not submitted 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.

d.  The Insurer draws its understanding of how medical disputes proceed under the Act, 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.

e.  It is not reasonable and necessary for AHZ to engage legal representation to complete the application form for the medical dispute as it is not necessary for solicitors to make legal- based submissions to a medical assessor.

f.  Additionally, the Insurer submits that AHZ was diagnosed with neck and right Shoulder pain by Dr Abdul Kader, GP.

g.  The Insurer submits that at internal review level the Insurer reviewed and assessed AHZ’s cervical spine injury, thoracolumbar spine (middle and lower back) injury, right shoulder injury, arm injury and psychological injury which was determined to fall within the definition of ‘minor injury’.

h.  The Insurer submits that Assessor Dr Nel Wijetunga assessed AHZ’s cervical spine, right shoulder and lumbar spine injury as a ‘minor injury’. The Insurer submits that AHZ was diagnosed with the following minor injuries by Assessor Wijetunga:

  • “Cervical Spine – Whiplash Associated Disorder”
  • “Lower Back – musculoligamentous strain”
  • “Right Shoulder injury – resolved”.

i.   Assessor Wijetunga reported no neurological abnormalities or major findings on examination. The Insurer submits the findings made by Assessor Wijetunga is consistent with the findings made by the Insurer in the internal review.

j.   The Insurer further notes that AHZ’s legal representatives have made no detailed submissions in support of the application to DRS. The Insurer submits the dispute in relation to minor injury should never have proceeded to DRS as the injuries sustained by AHZ was never of a nature that they would be determined as non-minor. The Insurer further submits that the medical evidence did not justify this application and strongly disagrees with AHZ’s legal representatives that an application to DRS in relation to the minor injury dispute was reasonable, necessary and justified.

k.  Therefore, the Insurer submits there should be no allowance for costs in relation to the minor injury medical dispute. The Insurer submits it is not in line with the objects of the Act where a claimant’s injuries are obviously minor to proceed to DRS and be assessed by a DRS Assessor and cause unnecessary delay to the claimant.

l.   In the alternative should the Merit Reviewer disagree with the Insurer’s submissions the Insurer submits AHZ’s legal representatives should only be awarded the minimum costs for completing the application form.

m.   Further in relation to the claim for legal costs for bringing the merit review application, the Insurer submits there should be no allowance for costs as there should be no allowance for the costs for the dispute in the first instance.

Reasons

13.   The issue in dispute before me is AHZ’s entitlement to legal costs relating to the application for medical assessment of the ‘minor injury’ dispute.

14.   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.

15.   Section 8.3(5) provides:

This section does not entitle an Australian legal practitioner to recover costs for a legal service or matter that a court or costs assessor determined were unreasonably incurred.

16.   The Insurer makes a number of submissions in relation to the payment of legal costs in this matter. The Insurer submits initially that it is unable to pay any costs for legal services in connection with medical assessments because there is no mechanism permitting such costs unless allowed by a Claims Assessor or a court.

17.   I do not agree with these submissions of the Insurer. I note that 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’ any other types of costs.

19.   The Insurer submits that the use of the words “claims assessor or court”, supports the intention of the scheme that claimants are not legally represented in applications for medical assessment matters unless the matter proceeds to a proper officer for review of a medical assessment or assessment of damages under Division 7.6 of the Act. I note however that the costs recoverable in the case of these latter forms of dispute are provided for separately under the Regulations.

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 were not to be 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 agree with the submissions of the Insurer that there is no mechanism allowing insurers to pay the costs of medical assessment matters and that this is in line with the perceived intention of the scheme that lawyers are not retained in medical assessment matters.

22.   Accordingly, I do not consider that AHZ has the onus of establishing that exceptional circumstances exist to allow costs in this matter, as submitted by the Insurer, because sub-section 8.10(4)(b) of the Act is not relevant as I am satisfied that Schedule 1, Part 1, clause 2 of the Regulations permit the recovery of reasonable and necessary costs of medical assessment matters.

23.   AHZ submits that the Insurer advised that it was unable to pay costs without an order from DRS, which appears to have been advised on the same basis as the submissions referred to above.

24.   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:

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.

25.   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 and make determinations or “orders”.

26.   Jurisdiction is therefore conferred to the DRS when there is a dispute referred for determination. 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 “order” or determination from the DRS 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 on the grounds as submitted in this case, 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, and clause 7.18.6 also stipulates that insurers are to attempt to identify and narrow any issues in dispute before applications are lodged with DRS.

Reasonable and Necessary Costs

29.   Having established that the costs of medical assessments are recoverable, I will proceed to assess AHZ’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.

30.   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.

31.   In this case, the Insurer issued a ‘Liability Notice – Benefits after 26 weeks’ on 9 November 2018 declining liability for statutory benefits after 26 weeks of AHZ’s claim on the basis that his injuries had been determined as ‘minor injuries’ under the Act. The Insurer relied on minimal information in this notice, being two medical certificates issued by AHZ’s General Practitioner which noted the injuries. The Insurer also provided very brief, if not nil, reasons for its decision that the injuries outlined on the medical certificates were ‘minor injuries’.

32.   AHZ’s lodged an application for internal review. I note that the costs of legal services provided to claimants in connection with applications for internal reviews are not recoverable pursuant to clause 23 of the Regulations.

33.   The Insurer issued its decision on internal review on 4 December 2018, affirming its original decision. The statement of reasons for the decision is just over 7 pages long. Unlike the original decision, the internal review provides a detailed history of the dispute and relies on a number of further documents, most significantly a radiology report from Dr Ali Kyatt dated 27 July 2018 (“the radiology report”.

34.   The radiology report provides the results of x-rays of the cervical spine and lumbar spine and an ultrasound of the right shoulder. The reported results clearly indicate “normal” findings with the exception of “a partial lumbarization of S1 vertebra” in the lumbar spine.

35.   Further to the above, the internal review outlines the legislative provisions of the Act, Regulations and the Guidelines relevant to determining ‘minor injury’. It then outlines the “facts in the matter”, referring to the medical evidence and specifically outlining the results of Dr Kyatt’s radiology report. The internal review then, considers the definition of ‘minor injury’ under section 1.6 of the Act and other relevant provisions as well as the results of Dr Kyatt’s report, and provides comprehensive reasons as to why AHZ’s injuries have been determined to be ‘minor injuries’ under the Act.

36.   On 17 December 2018, AHZ’s legal representatives lodged an application for medical assessment with the DRS. The application included a number of attachments, including the radiology report. The submissions made by AHZ’s legal representatives in support of the application was limited to the following:

The claimant submits he has not sustained a minor injury under the Act and refers to the following injuries to be assessed by the appropriate medical assessor:

1.   Cervical Spine

2.   Lumbar Spine

3.   Right Shoulder

37.   The dispute was referred to Medical Assessor, Dr Wijetunga who assessed the above injuries and determined in a medical assessment dated 26 February 2019 that the injuries were ‘minor injuries’ for the purposes of the Act. The Assessor provided the following diagnoses:

38.   AHZ makes a number of submissions in relation to why the application for medical assessment was necessary. He refers to a lack of investigation by the Insurer before making the decision and a failure to obtain all relevant medical records. The Insurer also submits that the decision was made by a “lay person” with no medical training which makes the decision difficult to accept. Submissions are also made in relation to AHZ’s “right” to have his injuries fully investigated and assessed by a Medical Assessor “who can provide a clear diagnosis in accordance with section 1.6” of the Act.

39.   I acknowledge the submissions made by AHZ and agree that the Insurer’s original decision was not based on or supported by sufficient medical information. However, as outlined above, the Insurer’s internal review was supported by medical evidence which concluded “normal” findings and the internal reviewer comprehensively explained why AHZ’s injuries were ‘minor injuries’ for the purposes of the Act. I note that the medical assessor made the same findings on medical assessment.

40.   Whilst injured persons have a right to have medical disputes determined by a medical assessor, this does not necessarily transpose to also having the right to recover the legal costs associated with such. As noted above, the legal costs need to be “reasonable and necessary”, to be recoverable under the Act. The application for medical assessment made by AHZ’s legal representatives, in my view, had no prospects of success based on the available medical evidence and the information provided in the internal review.

41.   For these reasons, I agree with the submissions of the Insurer that the dispute in relation to minor injury should never have proceeded to medical assessment as AHZ’s injuries were never of a nature that they would be determined as ‘non-minor’. I also note the Insurer’s submissions that it is not in line with the objects of the Act, where an injured person’s injuries are obviously minor, to proceed to the DRS and be assessed by a DRS Assessor, causing unnecessary delay to an injured person.

42.   I concur with the Insurer and further note that having every minor injury dispute proceed to medical assessment including ones with clearly no reasonable prospects of success, and having the legal costs of these applications recoverable, is not in line with the objects of the Act (section 1.3).

43.   Given that I do not believe the application for medical assessment had any reasonable prospects of success, I do not consider the legal costs incurred by AHZ in connection with the application reasonable and necessary.

44.   Pursuant to section 8.3(5) of the Act, I find that the legal costs incurred by AHZ in relation to the application for medical assessment dated 17 December 2018 were unreasonably incurred and are not recoverable.

Legal Costs

45.   AHZ also seeks to recover the legal costs of this application for merit review, in the amount of $1,633.00 plus GST.

46.   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 the claimant is under a legal disability or there are exceptional circumstances to justify payment of legal costs.

47.   Legal costs associated with disputes in relation to costs under Schedule 2, clause 1(aa) are not permitted by the Regulations and I am not satisfied that there are exceptional circumstances in this matter to justify payment of legal costs

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

Determination

49.   The Insurer’s reviewable decision made on 12 April 2019 is affirmed:

The legal costs incurred by AHZ in relation to the application for medical assessment dated 17 December 2018 are not recoverable.

50.   Effective date: This determination takes effect on 17 October 2019.

51.   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