Economic loss? Give me twenty good reasons, I need to know – Allianz Australia Insurance Limited v Sleiman [2016] NSWSC 851

The claimant was injured in a multi-vehicle accident. Liability was admitted by the insurer and the matter proceeded to CARS for an assessment of damages.

At the CARS assessment conference the extent of the claimant's injuries, his description of pain and restriction, his residual earning capacity and his entitlement to damages for both past and future economic loss were addressed.

The insurer conceded entitlement to past economic loss due to reduced earning capacity immediately following the accident. However, the insurer submitted that the claimant made a full recovery within six weeks. The insurer denied entitlement to future economic loss.

The claimant initially alleged that he could not manage heavy manual work and he was restricted to part-time supervisory activities. He later alleged that he had no residual earning capacity thereby contradicting his earlier evidence.

The primary issue for determination was residual earning capacity.

The Assessor had regard to medical evidence and in particular the opinion of the Medical Assessment Service (MAS) Assessor, and concluded that the claimant "does the best he can when giving histories to doctors for the purpose of medico-legal opinion, and in particular when examined by the MAS Assessors". She was satisfied that the claimant's pain behaviour was not manufactured and there was a reduction in earning capacity.

In quantifying the diminution in earning capacity, the Assessor's reasons cited submissions from Counsel for the claimant, who submitted that residual earning capacity was reduced to 25%, together with "the evidence given by [the Claimant] as to his capacity to work". The Assessor accepted that post accident residual capacity amounted to 25% of pre-accident earning capacity. The Assessor also commented that "the majority of doctors supported [the Claimant] having ongoing work restrictions".

No further reasons were provided, and the assumptions that led the Assessor to accept that the claimant's residual earning capacity had been reduced to 25% were not stated. The reasons did not address contradictory evidence, including contradictions in the claimant's own evidence.

The insurer commenced proceedings in the Supreme Court of New South Wales, alleging, inter alia, that the Assessor failed to give adequate reasons for findings in relation to the claimant's credibility, the determination of residual earning capacity and the calculation of future economic loss.

The insurer submitted that the finding of 25% earning capacity was inconsistent with the evidence, including evidence given by the claimant, and was not adequately explained.

The claimant submitted that the reasons had to be read as a whole and findings of fact by the Assessor in relation to injuries, together with a comparison of the claimant's earnings before and after the accident and medical opinions in relation to earning capacity, allowed the Assessor to find as she did.

Schmidt J held that that the Assessor "did not meet the statutory obligation to give reasons imposed by s94(5) and the Guidelines…because she did not reveal the path of reasoning that had led her to her conclusion as to the amount of damages that a court would be likely to award [the Claimant]."

Her Honour concluded that the Assessor was "obliged to give an explanation" as to her finding of 25% residual earning capacity and she did not satisfy that obligation.

While the Assessor noted that the majority of doctors found ongoing work restrictions, she did not specify what these restrictions were or how they would effect earning capacity.

Her Honour referred to Zahed v IAG Limited t/as NRMA Insurance² and confirmed that, while assessors are not expected to give reasons that are as detailed as a court would do, they must demonstrate the path of reasoning that leads to a particular conclusion.
Her Honour confirmed that, in accordance with Allianz Australia Insurance Limited v Sprod³, it was not sufficient for an assessor to simply refer to submissions or calculations provided a party.

Obligations imposed by Nominal Defendant v Livaja⁴ and Allianz Australia Insurance Ltd v Kerr⁵ required the Assessor to state the assumptions on which the award for future economic loss was based, and the Assessor did not meet those obligations. The Assessor's approach was similarly inconsistent with the requirements in pt 5.2 of the Motor Accidents Compensation Act 1999 (NSW), particularly s 126(3).

The Assessor's decision was set aside and the matter was remitted to CARS for rehearing before a different assessor.

This case confirms the well established principle that an assessor, when awarding damages for economic loss, must state the assumptions upon which the award is based.

As was the case in Allianz Australia Insurance Limited v Habib & Ors⁶, this case demonstrates that it is not sufficient for an assessor to simply refer to a set of calculations provided by a party, which contains the assumptions on which the award is based. A statement of assumptions is required.

Even when a beneficial construction of an assessor's reasons is applied, sufficient detail in relation to the relevant assumptions is required. Where the relevant assumptions are not stated, it is not permissible to simply make an inference or 'fill the gaps'.
The purpose of this approach is to ensure an element of rigor or method in the damages assessment process.