False or Misleading Exemption – Decision to deny discretionary exemption set aside

The first defendant alleged he sustained injuries in a motor vehicle accident on 24 April 2013 including a back injury. The first defendant was assessed by a number of medical professionals, including medico-legal doctors organised both by his lawyers and the insurer, treatment providers and independent medical assessors appointed by the Medical Assessment Service (MAS). To those doctors, and also in his personal injury claim form and a statement prepared for the purposes of his CARS application, he indicated he had no previous injuries to similar parts of his body.

In the process of investigating the claim, the insurer became aware that the first defendant had sought physiotherapy treatment just three weeks prior to the subject accident for back symptoms, for which he had also been prescribed the opioid Endone.

The insurer made an allegation that the first defendant had made a false or misleading statement in a material particular to the injuries, loss or damage he had alleged pursuant to clause 14.16.11 of the Claims Assessment Guidelines. The insurer then sought an exemption from CARS on that basis. On 31 October 2016, the third defendant (the claims assessor) determined the claim was suitable for assessment by reason that no fraud had been alleged and that the issue of the ‘inaccurate histories’ given to doctors could be cured by distributing updated histories to the doctors and asking for updated medical conclusions.

The insurer applied to the Supreme Court for review of the decision. Three grounds of the review were made:

1. that the claims assessor misunderstood her power under s 92(1)(b) of the MACA and incorrectly applied that power by incorrectly deciding the question of whether the claims assessment could be physically conducted in the circumstances
2. that the claims assessor denied the insurer procedural fairness by failing to address the nature and seriousness of the claims of false and misleading statements, the evidence of the adverse credit of the claimant, and the unfairness to the Insurer of any oral hearing or assessment before CARS and
3. that the claims assessor failed to provide adequate legal reasons for the suitability of the matter to be assessed at CARS.

His Honour Justice Davies handed down his decision on 5 May 2017. The decision expands upon the previous guidance provided in respect of discretionary exemption applications for false or misleading allegations in the decisions of Allianz Australia Insurance Ltd v Tarabay (2013) 62 MVR 537 and Insurance Australia Limited t/as NRMA Insurance v Banos (2013) 65 MVR 312. The decision notes the serious nature of false or misleading statements and confirms that an allegation of a false or misleading statement could be as serious as a fraudulent claim (or as in the circumstances of Banos an alleged forged document). An allegation of fraud is subject to a mandatory exemption from CARS.

His Honour inferred from the mandatory exemption for allegations of fraud that the absence of ‘sworn compellable evidence with a right of cross examination’ under CARS proceedings meant that ‘neither truth nor fairness to the parties’ was likely to be achieved other than in a court hearing where the rules of evidence also applied (at paragraph 36).

His Honour confirmed this was further emphasised by sections 117 and 118 of the Motor Accidents Compensation Act regarding false and fraudulent claims.

His Honour further considered that a view about the seriousness of the false and misleading allegations made must be a consideration as to whether a mater was suitable for assessment. He accepted therefore that it was not sufficient for an assessor to just consider whether an allegation of false and misleading statements had been made – it was also appropriate for an assessor to form a preliminary view regarding whether the claim is suitable for assessment given the nature of the allegation.

It was accepted that the assessor’s characterisation of the allegation by the assessor as it being a case of ‘inaccurate histories’ given to doctors failed to acknowledge the true nature of the allegation raised by the insurer. The assessor had failed to take into consideration the need for testing of the first defendant’s credit (which was not an insignificant matter in the proceedings) and the limitations of the CARS process in being able to undertake such testing.

His Honour Justice Davies quashed the order of the claims assessor and remitted the matter to SIRA for allocation to a different claims assessor to determine the Insurer’s exemption application according to law.

The decision is a useful one for insurers when allegations of false or misleading statements are raised. It confirms the serious nature of the allegation and the considerations that must be made by a claims assessor when determining whether the matter is suitable for assessment at CARS, particularly noting the ability to test a claimant’s credit given the limitations of the CARS process.

Insurance Australia Ltd t/as NRMA Insurance v Taylor [2017] NSWSC 507

This article was written with the assistance of Indigo Ryan, Paralegal.