Falling at the first hurdle – insufficient reasons for awarding a buffer for economic loss – IAG Limited t/as NRMA Insurance v Rahif Adhami [2016] NSWSC 1117
Originally Published by Lily Barbouttis on Wednesday, August 24, 2016 12:00:00 AM
Author: Lily Barbouttis
Judgment Date: 17th August, 2016
Citation: IAG Limited t/as NRMA Insurance v Rahif Adhami [2016] NSWSC 1117
Jurisdiction: Supreme Court of New South Wales1
Principles
When the claimant's most likely future circumstances are afflicted by uncertainty, it is sufficient for an administrative decision maker to award a buffer for future economic loss. However, when doing so, the assumptions and the reasoning behind those assumptions must still be clearly stated.
An administrative decision maker must ensure a reasonable insight can be obtained as to how the decision/conclusion was reached.
Background
The claimant was injured in a motor vehicle accident on 31 May 2012. The insurer admitted liability and the matter was referred to a claims assessor for an assessment of quantum.
Given the many uncertainties, the Claims Assessor (the Assessor) awarded the claimant a buffer of $150,000 for future economic loss inclusive of superannuation.
The insurer filed a summons in the Supreme Court of New South Wales for a judicial review of the assessment of future economic loss on the basis that the Assessor failed to comply with s 126(3) of the Motor Accidents Compensation Act 1999 (NSW) (the MACA) which provides that an assessor is required to state the assumptions on which the award was based. Those assumptions must be assumptions as identified in s 126(1) of the MACA, that is, the court must be satisfied 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.
The insurer's submissions focused on the Assessor's failure to state his assumptions by awarding a buffer of $150,000 and by failing to explain how those assumptions were reached.
In contrast, the claimant submitted that while the Assessor did not specifically use the word 'assumption' or 'assumptions' when considering the award for future economic loss, a fair reading of his reasons revealed the following assumptions about the claimant:
Given the many uncertainties, the Claims Assessor (the Assessor) awarded the claimant a buffer of $150,000 for future economic loss inclusive of superannuation.
The insurer filed a summons in the Supreme Court of New South Wales for a judicial review of the assessment of future economic loss on the basis that the Assessor failed to comply with s 126(3) of the Motor Accidents Compensation Act 1999 (NSW) (the MACA) which provides that an assessor is required to state the assumptions on which the award was based. Those assumptions must be assumptions as identified in s 126(1) of the MACA, that is, the court must be satisfied 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.
The insurer's submissions focused on the Assessor's failure to state his assumptions by awarding a buffer of $150,000 and by failing to explain how those assumptions were reached.
In contrast, the claimant submitted that while the Assessor did not specifically use the word 'assumption' or 'assumptions' when considering the award for future economic loss, a fair reading of his reasons revealed the following assumptions about the claimant:
- He has limited education and limited vocational skills
- He has a limited grasp of the English language
- As a 35-year-old he has a working life expectancy in the order of 32 years
- For the last four years he was out of the workforce caring for his wife and three young children
- He has been in receipt of a carer’s pension from Centrelink since 2011 due to his wife’s medical condition which involves regular and severe migraine attacks from which she is often incapacitated
- Any allowance for future economic loss needs to take into account the fact that such a loss would be deferred for 10 years as the youngest of the claimant's children were four-year-old twins.
Decision
Her Honour Harrison AsJ concluded that the Assessor provided insufficient reasons explaining how he arrived at his figure, thus was in breach of s 126 of the MACA.
In arriving at her decision, her Honour noted the following:
Her Honour therefore set the Assessor's decision aside and remitted the matter back to the State Insurance Regulatory Authority of New South Wales for redetermination in accordance with the law.
In arriving at her decision, her Honour noted the following:
- The Assessor made an assumption about past earning capacity in that the claimant had limited experience in unskilled occupations. However, the Assessor did not make any further assumptions about future earning capacity or other events on which the award was based that accord with the claimant’s 'most likely future circumstances but for the injury'.
- The Assessor did not make any assumptions in relation to the type of employment the claimant would have been able to engage in, whether he would return to future employment on a full-time or part-time basis and whether he would experience periods of unemployment.
- Although the Assessor referred to wage figures furnished by the insurer, he did not specifically state that he relied on them as assumptions.
Her Honour therefore set the Assessor's decision aside and remitted the matter back to the State Insurance Regulatory Authority of New South Wales for redetermination in accordance with the law.
Why this case is important
Administrative decision makers must be transparent and clearly state their reasons when assessing a buffer for future economic loss in order to satisfy the requirements of s 126 of the MACA.
Although the threshold for these reasons is not high, they must at least state the assumptions behind their conclusions. By doing so, they will allow a reasonable insight to be gained as to how they came to their decision.
For insurers, judicial relief may be sought if and when an administrative decision maker fails to satisfy the statutory requirements.
Although the threshold for these reasons is not high, they must at least state the assumptions behind their conclusions. By doing so, they will allow a reasonable insight to be gained as to how they came to their decision.
For insurers, judicial relief may be sought if and when an administrative decision maker fails to satisfy the statutory requirements.
Harrison AsJ.