On appeal, the insurer did not dispute that it was not entitled to withdraw the admission of liability that it made pursuant to s81. It contended, however, that it was nonetheless entitled to decline to indemnify the insured in respect of any liability arising from the claim made by the claimant, and that it was entitled to a certificate of exemption under s92(1)(a) pursuant to cl 8.11.5.
In a majority judgment by Beazley PA and Ward JA, the New South Wales Court of Appeal held that a s81 Notice admitting liability is not binding for all purposes. The insurer continues, after giving notice admitting liability under s81, to have an entitlement to deny indemnity to an insured.
In dissent, Simpson JA said:
As delegated legislation, the Guidelines must be read consistently with the Act. Since the language of s81(1) does not admit of an interpretation whereby an insurer can admit liability for the claim but not indemnify the insured, neither can sub-cl 8.11…
The exclusion of the insured… from involvement in the resolution of the claim has the consequence that once an insurer has admitted liability for a claim it cannot be given exemption from the assessment process by reason of sub-cl 8.11.5 of the Guidelines.
Mr Mordue filed an Application for Special Leave to the High Court of Australia. However, the matter settled satisfactorily before the Application was heard by the Court.
It therefore remains that an insurer cannot withdraw an admission of liability once it has been made; however, the notice admitting liability under s81 is not binding for all purposes, namely, an insurer continues to have an entitlement to deny indemnity to an insured.