QBE Insurance (Australia) Ltd v Mordue  NSWCA 380
Mr Mordue was involved in a motor vehicle accident on 1 December 2012 whilst a passenger in a motor vehicle participating in a motor rally event in a national forest near Taree. He sustained a significant injury to his neck.
Although the vehicle was unregistered, the driver of the vehicle (his son) obtained a “Permit to Operate an Unregistered Vehicle” (UVP) from the Roads Traffic Authority. The UVP allowed the driver to operate the vehicle for the purpose of the motor rally event on the date of the accident.
The CTP insurer of the vehicle was QBE.
Mr Mordue brought a compensation claim for his injuries and lodged a Personal Injury Claim Form with QBE.
On 14 February 2013, QBE Insurance issued a Section 81 Notice admitting liability. It proceeded to make s83 payments.
Under s140 of the Motor Accidents Compensation Act 1999 (NSW), a defence is available to CTP insurers when a motor vehicle accident occurs whilst the vehicle is engaged in motor racing. QBE had not relied on this defence, but had instead admitted liability. It therefore seemed that QBE had made their admission of liability by mistake.
On 5 June 2013, after QBE’s lawyers evidently realised that liability had been admitted in error, QBE issued an amended Section 81 Notice denying liability for the claim. QBE relied on s140 of the Motor Accidents Compensation Act 1999 (NSW) and denied liability because the motor vehicle accident occurred during the course of an organised motor sports event.
On 3 March 2014, after QBE appreciated that it was probably burdened with their erroneous Section 81 admission of liability, QBE wrote to the driver of the vehicle advising that it was refusing to indemnify him because the accident did not occur on a ‘public road’.
Shortly afterwards QBE lodged an application for Exemption from the Claims Assessment and Resolution Service (CARS) on the basis that fault and indemnity had been denied.
On 20 May 2014 the Principal Claims Assessor (PCA) accepted QBE’s submissions and issued a Certificate of Exemption and Reasons for the Decision.
Whilst the PCA accepted that an admission of liability cannot be withdrawn, she granted the exemption on the basis that the denial of indemnity rendered the claim unsuitable for assessment by CARS.
Mr Mordue sought judicial review of the PCA’s decision in the Supreme Court of NSW.
The decision was handed down on 20 February 2015.
Justice Adams identified that the crucial question was whether, after admitting liability, an insurer could later deny indemnity to the driver. This was an issue that had not been expressly dealt with by the Courts before.
Justice Adams found in favour of the Claimant Mr Mordue and quashed the PCA’s exemption from CARS. Justice Adams said:
The admission to the claimant was made for a statutory purpose and has statutory effects, the consequence of which necessarily binds QBE so far as its liability to the claimant is concerned. Since it cannot withdraw its admission to the claimant, its relationship with the insured is… immaterial…
It seems to me that, given an admission of liability under s81(1) cannot be withdrawn and that an indemnity is necessarily implied, the question of liability is precluded from further examination…
Moreover, as QBE is bound for all purposes by its Notice admitting liability, there is no room for the exercise of the discretion to exempt the claim, since the issue of indemnity… is no longer a live issue.
The following orders were made:
- The decision of the PCA made on 20 May 2014 is quashed.
- The Motor Accidents Authority is prohibited from issuing a certificate of exemption.
- The Plaintiff’s claim is to be determined by CARS.
- The Defendant to pay Mr Mordue’s costs.
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.