Legal costs - medical assessment - reasonable and necessary - exceptional circumstances - itemised bill of costs - internal review application - initial psychiatric consultation

Motor Accident Injuries Act 2017 (NSW) ss 1.3(2)(a), 1.3(2)(g), 7.13(4), 8.3(1), 8.3(4), 8.10, 8.10(1), 8.10(2), 8.10(3), 8.10(4), div 7.5, Schedule 2 clause 1(aa)

Motor Accident Injuries Amendment Regulation 2017 Schedule 1 Part 1(20 and Schedule 1 Part (2)

This decision has been edited to remove all Unique Personal Identification including the name of the Claimant.

Motor Accidents

Medical Assessment Service

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

1. The Insurer's reviewable decision not to pay costs dated 22 March 2019 is set aside and the following decision is made in substitution.
2. The Insurer is to pay AFZ's legal costs in the amount of $1,796.26 (inclusive of GST) in respect of the application for medical assessment dated 10 April 2019.
3. This decision takes effect on 27 September 2019.
4. The reasons for this decision are attached to this certificate.

Merit Reviewer and Claims Assessor Dispute Resolution Service

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

1. AFZ was injured in a motor vehicle accident on 16 January 2019. AAI Limited trading as GIO (the Insurer) accepted AFZ's claim under the Motor Accidents Injuries Act 2017 (the Act).
2. On 14 March 2019, AFZ sought approval from the Insurer to attend an initial consultation with a psychiatrist. The Insurer denied the request by letter dated 22 March 2019 saying that there was inadequate medical evidence to indicate that the treatment was reasonable and necessary.
3. On 26 March 2019, AFZ requested the Insurer conduct an internal review of its decision to deny medical treatment dated 22 March 2019.
4. On 9 April 2019, the Insurer advised AFZ that it was unable to complete the internal review within the required time frame. AFZ was therefore able to proceed to the Dispute Resolution Service (DRS) for a merit review without the Insurer's internal review being completed.
5. On 10 April 2019, AFZ lodged his application at the DRS for review of the Insurer's decision to deny treatment.
6. On 21 May 2019, the day the Insurer was due to lodge its reply at the DRS, it approved the treatment sought by AFZ on the basis that it had received further medical information which indicated that it was reasonable and necessary.
7. AFZ's solicitors advised the Insurer that if it agreed to pay the legal costs associated with the medical review, AFZ would agree to withdraw the merit review application at DRS. The Insurer did not consent to paying the legal costs on the basis that a dispute no longer existed and the matter did not proceed to an assessment.
8. On 12 June 2019, AFZ lodged a merit review application with the DRS seeking a review of the Insurer's decision to deny payment of legal costs for his application to the Insurer for determination of the medical assessment dispute.
9. On 14 June 2019, AFZ's legal representative issued a tax invoice to the Insurer for legal costs in the amount of $1,796.26 (inclusive of GST) for the medical assessment application to the DRS.
10. AFZ seeks payment of legal costs in the amount of $1,796.26 (inclusive of GST), for the application related to the original treatment dispute. AFZ also seeks costs for the Merit Review application lodged at DRS.

1. I have considered the documents provided in the application and the reply and any further information provided by the parties.

1. In conducting my review, I have considered the:
   • Motor Accident Injuries Act 2017 (NSW) (the Act)
   • Motor Accident Injuries Amendment Regulation 2017 (NSW) (the Regulation)
   • Motor Accident Guidelines 2017 (as amended on 15 January 2019) (the Guidelines)

AFZ's legal representative makes the following submissions on his behalf:

1. On 26 March 2019, an application was lodged for internal review of the Insurer's decision dated 22 March 2019 denying medical treatment. No medical evidence contradicting that provided by AFZ was provided by the Insurer. Once the Insurer maintained its decision or failed to make an internal review decision his only option for review was to apply to the DRS.
2. The Insurer acknowledged that it had failed to complete the internal review within the required time frame and asked AFZ whether he would like to allow the Insurer an extra week to complete the review or whether he sought to proceed to the DRS for a review. Due to the limited time frame open to AFZ to lodge a review at the DRS he chose to proceed with the application to the DRS rather than wait longer for the Insurer to complete the internal review.
3. Schedule 1, Part 1(2) of the Regulation provides for payment of the Claimant's costs in these circumstances. AFZ also submits the legal services were provided to him "in connection with a medical assessment".
4. It would be unsatisfactory if AFZ's legal representative was refused costs after the necessary work had been completed and the Insurer denied treatment for 2 months only to provide approval on 21 May 2019, being the last day for the Insurer's reply to be lodged at the DRS.
5. The Insurer should be required to pay AFZ's legal costs of $1,632.96 plus GST (invoice 275801 dated 14 June 2019) and he seeks a direction that the Insurer do so.
6. The costs incurred were reasonable and necessary as required by s 8.10 of the Act.
7. Exceptional circumstances apply as the Insurer refused to pay AFZ's costs of the medical dispute meaning the he had no option but to apply for a merit review at DRS.

The Insurer makes the following submissions:

1. Section 8.10(4) of the Act the DRS can permit payment of legal costs incurred only if is satisfied that the AFZ is under a legal incapacity or exceptional circumstances exist. In accordance with s 8.10.1 of the Act the legal costs in connection with the claim must also be reasonable and necessary.
2. Schedule 1, Part 2 of the Regulation sets the maximum costs for legal services in connection with a medical assessment under Division 7.5 of the Act as allowed, by a Claims Assessor or Court, at 16 monetary units (to a maximum of 60 monetary units per claim).
3. AFZ has failed to establish that he was under a legal disability or that exceptional circumstances exist to justify payment of the legal costs he has incurred.
4. The involvement of AFZ's solicitor in the internal review dispute goes against the Objects of the Act which puts a cap on legal fees in order to minimise the involvement of lawyers. There is no evidence to demonstrate that AFZ was incapable of referring the matter to the DRS himself and the DRS would have been able to help him with the application.
5. The internal review was not completed on time and AFZ was given the option of either waiting for the completion of the internal review or to proceed directly to the DRS. AFZ chose to proceed directly to the DRS. Once the matter was at the DRS it overturned its original decision.
6. The decision to deny treatment was made on the basis that there was a lack of evidence to demonstrate that the treatment was reasonable and necessary. The denial was overturned once further medical evidence (in the form of a completed questionnaire from AFZ's GP) was received. The initial denial was not the fault of the Insurer rather it was the failure of AFZ's general practitioner to substantiate and justify the referral to a psychiatrist.
7. Schedule 1, Part 2 of the Regulations sets a maximum cap on the recovery of legal costs and does not entitle AFZ to recover the maximum recoverable fee by default. An itemised bill of costs has not been provided and AFZ has not established why a claim for the maximum amount of costs is reasonable and necessary.
8. Exceptional circumstances have not been established for payment of legal costs. It has also not been established that the legal costs are reasonable and necessary in the absence of an itemised bill outlining the work that was completed and by whom.
9. Legal costs in regard to the merit review application at the DRS are not listed under Schedule 1, Part 2 of the Regulation and are therefore not allowable.

AFZ's legal representative makes the following response to the Insurer's submissions:

1. The Insurer has misinterpreted the legislation and regulations to which they refer.
2. The Insurer firstly relies on s 8.10(4) of the Act to say that the DRS can permit the payment of legal costs only when satisfied that AFZ is under a legal disability or exceptional circumstances exist that justify payment of the costs incurred. The Insurer also relies on s 8.10(1) of the Act which says that AFZ is entitled to recover from the Insurer against whom the claim is made the reasonable and necessary legal costs, and other costs and expenses, incurred by him in connection with the claim. However, s 8.10(2) and s 8.10(3) of the Act appear to have been ignored and those sections make it clear that AFZ is entitled to claim the costs in connection with the medical assessment.
3. Section 8.10(4) of the Act does not need to be satisfied as the DRS does not need to permit payment of legal costs in relation to the medical assessment. He is entitled to recover costs for the medical assessment as permitted by the Regulations. It is only in circumstances where the Regulations do not permit payment of legal costs, that he would need to satisfy s 8.10(4) of the Act.
4. AFZ disagrees with the Insurer's assertion that his use of a solicitor for the internal review is against the Objects of the Act as they do not state their intention is to place a cap on legal fees and minimise the involvement of lawyers. Further, it is unfair to suggest that he should not be able to have access to independent legal advice when challenging the decision of a highly resourced insurer.
5. The Act clearly states that solicitors cannot recover legal fees for services provided in relation to the preparation of an internal review. Despite solicitors not being entitled to these fees it is important that representation is available at that stage as strict time frames for lodging an application exist.
6. The Insurer concedes that it failed to complete the internal review despite its significant resources. The Insurer's failure to adhere to timeframes has a greater consequence for AFZ than the Insurer including the DRS not having jurisdiction to conduct a review.
7. The medical dispute could have been avoided if the Insurer had complied with the Objects of the Act as set out in s 1.3.
8. AFZ sought approval for an initial consultation with a psychiatrist as supported by his GP who is qualified to make the referral based on clinically assessing him. The insurer blamed his GP for the delay in approving treatment. However, it was the Insurer's decision to request further information which, in the absence of any information to the contrary was not necessary and caused the delay. The Insurer appeared to have received the further information from the GP well before making the decision to approve medical treatment.
9. The request for medical treatment was made on or about 14 March 2019 and the approval was provided on 21 May 2019, more than 2 months later.
10. The Insurer suggests that he should not be able to claim the maximum recoverable costs under the Regulation. However, having been advised by the Insurer to lodge a review at the DRS and having failed to have the decision overturned by an internal review there is no reason he should not be entitled to the maximum costs in connection with the dispute.
11. The Insurer's request for an itemised bill of costs is unreasonable where the legislation only provides for regulated costs which are minimal and inadequate.
12. Payment for the application for review of the medical dispute and merit review should be made. If the Regulation does not allow for costs of the merit review payment should be allowed under s 8.10(4)(b) of the Act noting that exceptional circumstances exist, as outlined in his submissions.

1. The issue in dispute is AFZ's entitlement to legal costs in the amount of $1796.26 (inclusive of GST) relating to the medical assessment dispute at the DRS lodged on 10 April 2019.
2. Section 8.3(4) of the Act provides that an Australian legal practitioner is not entitled to be paid or recover legal costs for any legal services provided to a party to a claim for statutory benefits in connection with the claim unless payment is permitted by the Regulations or the DRS.
3. Section 8.3(1) of the Act provides for the Regulations to fix the maximum amount of costs recoverable by an Australian legal practitioner.
4. Section 8.10(1) of the Act 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 is permitted by the Regulations or the DRS.
5. This application for costs has been referred as a merit review matter under Sch 2, cl 1(aa) of the Act which provides:

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.

1. Accordingly, I am satisfied that the DRS has jurisdiction to determine whether the costs incurred AFZ are reasonable and necessary.
2. AFZ submits the costs incurred were both reasonable and necessary and that exceptional circumstances arose therefore the legal costs should be paid by the Insurer.
3. The Insurer submits that s 8.10(4) of the Act provides that the DRS can only permit payment of legal costs if I am satisfied that AFZ is under a legal incapacity or special circumstances exist. The Insurer submits that s 8.10(1) is then applied to determine whether the costs are reasonable and necessary. The Insurer argues that AFZ has not established either of these requirements.
4. Schedule 2, 1(aa) of the Act identifies as a merit review matter a dispute as to whether costs and expenses incurred by the Claimant for the purposes of s 8.10 are reasonable and necessary.
5. Section 8.10(3) refers to a Claimant being able to recover reasonable and necessary legal costs if those costs are permitted by the Regulation or the DRS.
6. Section 8.10(4) refer to the Claimant being able to recover legal costs in circumstances where they are under a legal disability or exceptional circumstance exist that justify payment of the costs incurred.
7. I am satisfied that s 8.10(3) allows a Claimant to recover reasonable and necessary legal costs to a maximum amount as provided for by the Regulations.
8. Section 8.10(4) is not limited by the Regulation and an amount can therefore be determined by the DRS but only if the Claimant is under a legal incapacity or exceptional circumstances exist to justify payment of the legal costs.
9. Having established that the costs of a medical assessment are recoverable I will now determine whether or not those costs were reasonable and necessary.
10. Schedule 1, Pt 1, cl 2 of the Regulations limits costs in connection with a medical assessment to 16 monetary units. In accordance with Sch 2, cl 1(aa) of the Act I am required to determine the amount of costs I consider reasonable and necessary in this instance.
11. The Insurer argues that the decision to deny treatment was made due to a lack of medical evidence and that once further medical information was received the decision was overturned and treatment approved. The Insurer also says that the Objects of the Act minimise the involvement of lawyers and AFZ has not provided any evidence that he was not able to make the application to the DRS on his own or with assistance from the DRS.
12. The Objects of the Act promote the provision of early and appropriate treatment and care to achieve optimum recovery of persons who have sustained an injury in a motor vehicle accident to maximise their return to work and other activities, under s 1.3(2)(a) of the Act. They also promote the early resolution of motor accident claims by the quick, cost efficient and just resolution of disputes, under s 1.3(2)(g) of the Act.
13. The Insurer argues that the decision to deny treatment was made due to a lack of medical evidence. The Insurer sought a "justification" from Dr Benjamin for his referral for an initial psychiatric consultation and it was Dr Benjamin's delay in providing a response that prevented the treatment from being approved earlier. AFZ argues that the Insurer chose to seek further information from Dr Benjamin rather than accepting his clinical assessment resulting in the referral for medical treatment. AFZ also points out the Insurer did not have any medical information to contradict Dr Benjamin's referral.
14. AFZ followed the procedure available to him to have a decision by the Insurer reviewed by lodging an Internal Review application. The Insurer failed to comply with the Guidelines by completing the

Internal Review within the required time frame. AFZ was therefore entitled to make an application for a medical assessment matter to the DRS for review of the Insurer's decision to deny treatment. The Insurer suggests that AFZ should have been able to lodge his application for review at the DRS without the assistance of a legal practitioner. However, the Act does not prevent him from doing so. AFZ's request for an initial consultation for psychiatric treatment was based on the clinical assessment of Dr Benjamin. It is unclear why further information was needed for an initial appointment given that it was made by a medical practitioner.

1. AFZ seeks payment of costs in the amount of $1,796.26 (inclusive of GST). AFZ's request for treatment being an initial consultation with a psychiatrist was not onerous on the Insurer. When the request was denied AFZ followed the process available to him and the Insurer failed to complete the Internal Review in time. AFZ again followed procedure by lodging an application for review at the DRS. AFZ's legal representative has providing submissions and documentation outlining the basis of his application and I am satisfied that the costs associated with the application, being $1,796.26 are reasonable and necessary for the work completed.
2. AFZ submits that he is entitled to have the costs of this merit review application paid under s 8.10(4)(b) of the Act because the matter involves exceptional circumstances to justify payment of the legal costs. The Regulation does not provide for the payment of legal costs in relation to this Merit Review application under Sch 2, cl 1(aa) which only allows for costs that are reasonable and necessary type.
3. I have considered AFZ's submissions that his matter involves exceptional circumstances because the Insurer refused to pay the costs of the medical dispute which he then had to challenge. I am not satisfied that simply requesting a review of the Insurer's decision qualifies as exceptional circumstances. The payment of costs associated with a merit review application to the DRS are therefore not available.

1. The Insurer's reviewable decision of 6 June 2019 is set aside and the following decision is made in substitution:
2. The Insurer is to pay AFZ's legal costs in the sum of $1,796.26 (inclusive of GST) as referred to in invoice number 275801 issued by his legal representative on 14 June 2019.
3. The amount of AFZ's legal costs on this application are assessed in accordance with the Motor Accident Injuries Regulation 2017 as $nil.

Merit Reviewer and Claims Assessor Dispute Resolution Service