In Brief
- The Principal Claims Assessor currently holds the view that there is no distinction between offers made under s 82(1) of the Motor Accidents Compensation Act 1999 (the Act) and offers not made under s 82(1).
- In our view, the PCA's interpretation of s 82(1) discourages early negotiations and conflicts with the legislative object of encouraging early resolution of claims.
- In our opinion, the preferable interpretation is that the parties are free to enter into early, informal negotiations and that the formal processes laid down by the Act are only invoked when those negotiations fail and the claimant provides Section 85A Particulars (assuming sufficient recovery has also been achieved).
Background
The Principal Claims Assessor (PCA) presented a Masterclass at Curwoods on 24 August 2010 on the time limits imposed by the October 2008 amendments to the Motor Accidents Compensation Act 1999 (the Act).
Those who attended will recall that the PCA questioned whether there were "Section 82 Offers" and "Non-Section 82 Offers". She favoured the view that no such distinction existed and that the insurer's first offer discharged the insurer's obligations under s 82(1).
In our view, the PCA's interpretation of s 82(1) is misconceived.
Section 82(1)
Section 82(1) provides:
(a) within 1 month after the injury is sufficiently recovered to enable the claim to be quantified, or
(b) within 2 months after the claimant has provided to the insurer all relevant particulars about the claim as required by section 85A,
whichever is the later.
As we understand it, the PCA's position is that s 82(1) is "about the insurer's duty to make an offer" so, once an offer is made, s 82(1) "has no more work to do."
For the reasons outlined below, we disagree with this construction.
The Implications of the PCA's Interpretation
In our view, the PCA's interpretation of s 82(1) is problematic for Insurers and does not accord with the objects of the Act, which include early resolution of claims.
If the PCA's construction were correct:
- The making of an early offer would discharge the insurer's duties under s 82(1);
- If the claimant has not already provided Section 85A Particulars, he or she is no longer under any duty to do so;
- Given that the making of a Section 82 Offer triggers the obligation to conduct a Section 89A Conference, the claimant may insist that such a Conference be convened; and
- If the insurer refuses to participate in the proposed Section 89A Conference, the claimant is arguably at liberty to immediately lodge a CARS 2A – Application for General Assessment.
Given these consequences, the PCA's interpretation of s 82(1) constitutes a significant disincentive to the making of early offers of settlement.
Why would the insurer make an early offer – with a view towards early resolution – if this would potentially allow the claimant to avoid providing Section 85A Particulars and proceed directly to a Section 89A Conference?
Conflict with Objects of the Act
It is our view that the PCA's interpretation conflicts with the objects of the Act.
Pursuant to s 5(1)(b), one of the key objects of the legislation is to "encourage the early resolution of compensation claims".
On the PCA's interpretation, the insurer's first offer discharges the insurer's duty to make an offer under s 82(1) with the adverse consequences described above. As such, the PCA's interpretation discourages early offers and fails to promote early resolution.
The Correct Interpretation
In our view, there is a clear distinction between the informal negotiations which take place during the early stages of a claim and the formal negotiations which take place after the procedures laid down by the Act are invoked.
Those informal negotiations are essential to the operation of the Scheme. Many matters resolve that way, before significant costs are incurred.
Section 82(1) comes into play – and "has work to do" – only when "sufficient recovery" has been achieved and the claimant provides Section 85A Particulars.
In our opinion, the dividing line between the early, informal negotiations routinely entered into by the parties and the insurer's formal Section 82(1) Offer is the provision of Section 85A Particulars.
Provided the claimant has achieved "sufficient recovery", the event which invokes the insurer's duty to make a formal Section 82(1) Offer is the claimant's act of formally defining the scope of his or her claim by providing Section 85A Particulars.
This interpretation of the relevant provisions:
- Encourages early negotiation by ensuring that no adverse consequences flow to the insurer when it makes an early offer; and
- Provides for a formal negotiation process in the event that the early, informal negotiations fail to resolve the claim.
Implications
The PCA's (in our view) erroneous interpretation of Section 82(1) will not come to the fore until she is required to formally decide whether a CARS 2A has been lodged in compliance with the new time limits imposed by the October 2008 amendments.
In the meantime, we recommend that insurers continue to honour their duty to attempt early resolution of claims by engaging in informal negotiations pending sufficient recovery and the provision of Section 85A Particulars.
Any such offers should be accompanied by a clear statement that the offer in question is not a Section 82 Offer.
In the event that the PCA refuses to dismiss a CARS 2A which has been lodged following an early offer of settlement, prior to sufficient recovery and/or without the provision of Section 85A particulars, serious consideration should be given to challenging the PCA's interpretation in the Supreme Court.
In short, the PCA's interpretation potentially provides claimants with a short-cut to CARS. Ironically, the short-cut only becomes available when the insurer adheres to its duty to attempt early resolution of claims.
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