Insurance Australia Group Ltd t/as NRMA Insurance v Abboud

Background

1. The first defendant, alleged that he suffered physical injuries, to his back and neck, and psychological injuries, caused by a motor accident on 28 January 2013.
2. The plaintiff was the compulsory third party insurer of the vehicle at fault. It admitted liability for the claim made by the first defendant, but disputed the injuries and disabilities alleged anddisputed the quantum of damages claimed.
3. The first defendant's damages were required to be assessed under the Act.
4. The first defendant's physical and psychological injuries were assessed by the Medical Assessment Service to determine whether or not the first defendant was entitled to damages for non-economic loss. The first defendant was found to have only minor impairment and was not entitled to damages for non-economic loss.
5. An application was made by the first defendant for the assessment of his damages by the Claims Assessment and Resolution Service ("CARS"); a division under the authority of the second defendant.
6. As the first defendant had no entitlement to damages for non-economic loss, the remaining heads of damage were assessed by the third defendant following an Assessment Conference (essentially an informal hearing) on 27 February 2017.
7. The third defendant issued the certificate (and statement of reasons) on 17 March 2017. He assessed the total damages of $438,559.17 was made up as follows: Out-of-pocket expenses $13,559.17 Future medical treatment costs (buffer) $25,000.00 Past loss of earnings (incl superannuation) (buffer) $50,000.00 Future economic loss (incl superannuation) (buffer) $350,000.00 Future commercial domestic assistance Nil Total: $438,559.17

1. The plaintiff asserted that the assessment of damages by the third defendant for future medical treatment costs, past loss of earnings and future economic loss were affected by legal and/or jurisdictional error.

Findings by the Assessor

1. Pursuant to s 94(5) of the Act, the third defendant provided his findings in a document entitled: "Reasons for Decision - General Assessment". A summary of his findings follows.
2. The third defendant recorded at [6]: [6] In both his statement and at the Assessment Conference [the first defendant] described his post-accident symptoms as having a devastating affect on him. He describes his pain as a daily experience of "excruciating pain". He states he suffers from depression, is withdrawn and all aspects of his life have been significantly and adversely affected.
3. Part of the attack on the first defendant's credit involved the use of surveillance film which, had previously been served on the first defendant and provided to the third defendant.
4. The third defendant found that the activities undertaken by the first defendant, captured on surveillance film, were inconsistent with the first defendant's description of his physical and psychological injuries. He reported (at [8]): [8] The Insurer obtained surveillance of [the first defendant] which shows him undertaking activities which are contrary to that of a person in the condition which he described. He is shown on four occasions throughout 2014 walking freely, standing unsupported on a ladder painting, standing on a ladder and operating a nail gun and generally undertaking activities consistent with working at his pre-injury carpentry and building business.
5. The third defendant also noted the first defendant's attempted explanation of the surveillance film, which he rejected (at [9]-[10]): [9] In my view the film of the [first defendant] is completely contrary to the restrictions which he states he suffers from. That is, it does not show him to be suffering from depression, neither does it show him to be withdrawn... [10] In particular the film of him standing high an unsupported on a ladder operating a nail gun for a protracted period of time is not consistent with a person who describes he suffers from back pain "all the time" and "cannot return to any meaningful work" nor a person who "attempted to do light duties" but couldn't do it.
6. The third defendant sustained the attack on the first defendant's credit was successful. The third defendant found (at [12]): [12] In general I did not accept the [first defendant's] statements as to the adverse affects which the injuries have had on him, I found he was prone to exaggeration.
7. The third defendant also declined to accept that the medical evidence on which the first defendant relied supported the evidence he gave as to the gravity of his physical and psychological symptoms. He found (at [17]): [17] The submission made at the Assessment Conference that the [first defendant's] condition is now far worse than it was is not a submission for which I could find any medical support to ascribe the development of a condition as devastatingly debilitating as the [first defendant] would make it out to be. Indeed, opinion is so totally divergent in some of the medical material, in so far as it relates to psychological treatment in particular, that it suggests the [first defendant] is malingering.
8. The third defendant concluded that the first defendant's physical injuries were "not particularly disabling". He opined (at [29]): [29] In my view the medical material does not make out the degree of incapacity suggested by the [first defendant]. I accept he has some soft tissue injuries to his cervical and lumbar spine but I do not consider this material to be particularly disabling.
9. The third defendant did not accept the first defendant's evidence that his injuries adversely affected all aspects of his day-to-day life (at [31]).
10. The third defendant also found that the first defendant had overstated his psychological symptoms (at [35]): [35] ... there was no material to support [that] the [first defendant] had, since the accident, received treatment from either a psychologist or a psychiatrist. In my view this is not reflective of a person of whom it is said is so psychologically disabled he cannot work, is in need of significant and protracted ongoing psychological or psychiatric treatment and, solely as a result of psychological injuries or chronic pain, is in need of seven hours commercial assistance per week or, indeed, any at all.
11. It was not accepted the first defendant suffered chronic physical pain such as to be likely to give rise to psychological symptoms. The third defendant concluded (at [42]): [42] ... I do not accept the [first defendant's] allegations in respect to the severity of his physical incapacity. That is, I do not accept he is restricted in all areas of his life nor that he is physically incapable of any kind of employment. Accordingly, it follows a diagnosis of psychological injury as a result of such physical disabilities is somewhat flawed.
12. The first defendant alleged that his pre-accident earning capacity was in the order of $2,400 net per week. He further asserted that his earning capacity was largely or completely destroyed by his physical and psychological injuries. Both assertions were rejected by the third defendant. The third defendant found that the first defendant's pre-accident earnings "were closer to $400 net per week", not $2,400 net per week (see at [11] and [56]).

Ground 1: The reasons for decision are inadequate

1. Section 94(5) of the Act requires a claims assessor to attach a brief statement of reasons to his or her Certificate.
2. The content of the assessor's obligation to give reasons is set out in cl 18.4 of the Claims Assessment Guidelines as follows: A certificate under ss 94 or 96 is to have attached to it a statement of the reasons for the assessment. The statement of reasons is to set out as briefly as the circumstances of the assessment permit: 18.4.1 The findings on material questions of fact; 18.4.2 The Assessor's understanding of the applicable law if relevant; 18.4.3 The reasoning processes that lead the Assessor to the conclusions made; and 18.4.4 In the case of an assessment certificate pursuant to s.94, the assessor must specify an amount of damages and the manner of determining that amount.
3. The obligation of a claims assessor to give reasons is not to be equated with that of a judge: Allianz Australia Insurance Ltd v Kerr [2012] NSWCA 13 ("Kerr") at [53]. Nonetheless, a claims assessor must provide reasons sufficient to expose the actual path of reasoning by which he arrived at his or her assessment of damages: Zahed v IAG Ltd t/as NRMA Insurance [2016] NSWCA 55 ("Zahed") at [42]-[43].
4. In Zahed, the Court of Appeal stated (at [43]): [43] ... while the reasons required are not necessarily those which may be expected of a judge, the reasons must demonstrate the path of reasoning that leads the claims assessor to a conclusion as to the amount of damages that a court would be likely to award, in order to make an assessment of the amount of damages that a court would be likely to award, a claims assessor must have regard to the reasoning process that the court would be required to adopt in awarding damages.

Past loss of earnings

1. When calculating past loss of earnings, the third defendant stated that he assessed damages on the basis of a loss of earning capacity of around 20%; that is, that the first defendant's residual earning capacity was 80% of his pre-accident capacity.
2. However, the third defendant applied that loss of earning capacity to assumed pre-accident earnings of $50,000 per annum contrary to his prior and subsequent finding that the first defendant's pre-injury earnings "were closer to $400 net per week".
3. The third defendant appeared to have treated the sum of $50,000 per annum as net of tax, equivalent to almost $1,000 net per week. His award of a "buffer" of $50,000 for past loss of earnings equated to an award of $230 net per week over the period of 4 years 2 months from the date of accident to the date of the award.
4. If the award was intended to represent a loss of 20% of the first defendant's pre-accident earning capacity, then the first defendant's prior earning capacity was $1,150 net per week, which is inconsistent with the third defendant's finding that the first defendant's pre-accident earnings "were closer to $400 net per week".
5. If an assessment of a loss of earning capacity of 20% was applied to earnings of $400 net per week then the resultant award of past loss of earnings would appear to be $17,360.
6. The third defendant's reasons did not provide any adequate explanation for the use of the sum of $50,000 per annum as the basis for calculating past loss of earnings. Nor can any reason be inferred from the use of that figure.
7. The third defendant's reasons for his assessment of damages for past loss of earnings were, therefore, inadequate and did not properly disclose the path of his reasoning.

Future medical treatment costs

1. Having found that the first defendant suffered minor physical symptoms in his back and neck and a minor ongoing psychological impairment "both of which required some pain relief medication and some intermittent treatment", the third defendant awarded a buffer of $25,000 for future medical treatment costs on the basis of the following reasons (at [71]): [71] It is not possible with any degree of accuracy to predict the required level of treatment the [first defendant] will require over the remainder of his life consequent on the relatively minor injuries he sustained in the motor vehicle accident. There will be periods when he may require some physiotherapy or reviews by medical practitioners. It is equally likely there will be substantial periods of time when he will require no treatment at all.
2. The path of reasoning leading to the award of $25,000 for future treatment costs is unexposed by those reasons. Even accepting the third defendant was not sitting as a Court, as such, at least a rudimentary explanation was required as to how the amount of $25,000 was reached or the cost of any of the components of which that amount was comprised. The assessment made clearly raises significant doubts as to its appropriateness.

Future economic loss

1. The third defendant elected to deal with future economic loss by way of a "buffer". That of itself is not objectionable in circumstances where any precise weekly calculation would be fraught with difficulty, or perhaps impossible: Allianz Australia Insurance Ltd v Cervantes [2012] NSWCA 244 ("Cervantes") at [37]-[39].
2. However, the entirety of the third defendant's reasons for awarding the very substantial buffer were contained in one paragraph (at [57]) as follows: [57] There was no real dispute [that] the [first defendant] was undertaking physically arduous work, is at the beginning of his working life and did not suffer any pre-existing injuries and disabilities. That said, and as I have outlined above, I do not find the injuries sustained by the [first defendant] in the motor vehicle accident have ended his working life, nor have they had the devastating effect on the [first defendant] which he contends. They have interfered with his ability to pursue his employment options. They have left him with some minor ongoing physical difficulties and some psychological problems which will have an adverse affect on his ability to perform work in an unrestricted matter and interfere with his capacity to work in the physically arduous profession he has chosen in the future.
3. The third defendant considered that the first defendant did have a residual earning capacity (at [50]). When calculating past loss of earnings, the third defendant seemed to have assessed damages on the basis of a loss of earning capacity of around 20%; that is, that the first defendant's residual earning capacity is 80% of his pre-accident capacity (at [51]).
4. The third defendant awarded damages for future economic loss by way of a "buffer" of $350,000. These findings were made, notwithstanding the third defendant finding that the first defendant's physical injuries are "not particularly disabling" and that his psychological injuries are not so disabling that the first defendant could not work (and did not give rise to any requirement for domestic assistance).
5. There is no explanation at all for these apparent inconsistencies in the third defendant's reasons.
6. For example, the amount awarded is inconsistent with the finding by the third defendant when assessing past loss of earnings, namely, that the first defendant has suffered a loss of only 20% of his pre-accident earning capacity. This differential was unexplained.
7. The plaintiff asserted that the amount awarded for future economic loss was well above any acceptable range of damages, having regard to the material before the third defendant, and having regard to the third defendant's own findings.
8. The monetary amount of an award may be indicative of error of itself: Cervantes at [43]. It is permissible for that purpose to make an "indicative calculation" of the weekly loss to which a particular buffer is equivalent.
9. The Plaintiff submitted, the first defendant was 26 years old at the time of the Assessment Conference. There were 41 years remaining to his retirement age of 67.
10. It was further submitted that the sum of $350,000 awarded by the third defendant for future economic loss was equivalent to a weekly loss of $450 net per week over a period of 41 years, after deducting 15% for vicissitudes.
11. It was contended that a weekly loss of $450 net exceeded the third defendant's "twice-made statement that the First Defendant was earning around $400 net per week at the time of the accident. While it is true that the Third Defendant noted that the First Defendant may have continued to develop his business and increase his earnings but for the accident, a weekly loss of $450 net must amount to near-total incapacity for work."
12. It was contended that the "indicative calculation" highlighted the inadequacy of the third defendant's reasons in assessing damages for future economic loss. In the absence of any assessment by the third defendant as to the appropriate sum, I consider that the plaintiff has made good that contention.

Ground 2: The reasons do not comply with s 126 of the Act

1. In assessing damages for future economic loss, the third defendant's reasons must be sufficient to comply with s 126 of the Act, notwithstanding that damages were awarded by way of a buffer (and, therefore, the obligation to give reasons may be discharged by more general statements than if a mathematical calculation had been made): Allianz Australia Insurance Ltd v Sprod [2012] 81 NSWLR 626 at [30]; Kerr at [69].
2. Section 126 of the Act provides: 126 Future economic loss - claimant's prospects and adjustments (1) A court cannot make an award of damages for future economic loss unless the claimant first satisfies the court that the assumptions about future earning capacity or other events on which the award is to be based accord with the claimant's most likely future circumstances but for the injury. (2) When a court determines the amount of any such award of damages it is required to adjust the amount of damages for future economic loss that would have been sustained on those assumptions by reference to the percentage possibility that the events concerned might have occurred but for the injury. (3) If the court makes an award for future economic loss, it is required to state the assumptions on which the award was based and the relevant percentage by which damages were adjusted.
3. That provision appears in the assessment undertaken by the Claims Assessors under Pt 4.4 of the Act in the same way as it applied to an award of damages by a Court (see s 122(3) of the Act).
4. The decision of the third defendant made no reference to s 126 of the Act.
5. The third defendant did not state, even in general terms, what work the first defendant would have done in the future but for his injuries. Nor did, he state what work the first defendant was likely to do in his "injured state", or how these two considerations may differ in economic terms.
6. The statements the third defendant made regarding interference with "employment options" and with the first defendant's "capacity to work in his physically arduous profession" did not meet the requirements of s 126 of the Act.
7. The third defendant's reasons did not explain how the sum of $350,000 was assessed. Nor can any reason for an award of this order be inferred.
8. Having regard to the third defendant's previous finding that the first defendant had lost only 20% of his pre-accident earning capacity, the reasons why the amount awarded for future economic loss is difficult to understand.
9. The transparency in the path of reasoning that s 126 of the Act was designed to ensure was, therefore, lacking and, in the result, the third defendant failed to engage with and perform the task prescribed by s 126 of the Act.
10. On this basis, the reasons for the award of damages for future economic loss are inadequate. The failure to comply with the requirements of s 126 of the Act also amounts to an error of law on the face of the record.
11. In light of the aforementioned considerations as to Grounds 1 and 2 it is unnecessary to consider the third ground advanced in support of the summons.

CONCLUSION AND DIRECTION

1. The plaintiff has made good its contentions in support of the first and second grounds for the application described above. In general terms, the plaintiff has established the basis for the granting of the first to third prayers for relief, although some refinements to the proposed orders may be required. To that end the plaintiff should provide short minutes of order, reflective of this judgment, within 7 days of the publication of the judgment.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 17 November 2017