Insurer recovers reasonable settlement costs from intoxicated insured
December 5, 2012
Suncorp Metway Insurance Limited v Ruckman  QSC 100
In this case, the Supreme Court of Queensland found that, when recovering costs incurred pursuant to s58 of the Motor Accident Insurance Act 1994 (Qld) (‘MAIA’), it is possible for a payment made by an insurer to an injured party to be reasonably incurred as to some heads of damage and unreasonably incurred as to another.
Larrasquet and Brettes were injured in a head on motor vehicle accident caused by the negligence of Ruckman.
Both Larrasquet and Brettes made CTP claims with Suncorp, the insurer of Ruckman’s vehicle. The claims were settled for $42,539.60 and $1,221,567.22 respectively.
Suncorp sought to recover the settlement amounts from Ruckman pursuant to s58 of the MAIA, which provides for an insurer to recover costs reasonably incurred on a claim for personal injuries [being its liability to Larrasquet and Brettes] from an insured person [in this case Ruckman] in certain circumstances.
Suncorp established through expert evidence that Ruckman was intoxicated and consequently was either asleep or at least not sufficiently alert to exercise effective control over the vehicle, and was unaware of his vehicle’s position on the road.
This is one basis which s58 permits an insurer to apply for recovery of its costs.
Ruckman conceded that the settlement to Larrasquet ($42,539.60) was within the range that could have been achieved should the matter have gone to trial.
However, in respect of Brettes’ claim, Ruckman argued that there were areas in which Suncorp had not demonstrated it had reasonably incurred costs in the settlement sum, namely:
- Future impairment of earning capacity
- Future out of pocket expenses
- Future care.
He argued that Suncorp had failed to make appropriate inquiries with respect to those heads of damage, which affected the entire settlement and, therefore, Suncorp should not recover anything from him.
Suncorp argued that the payments were reasonably incurred, and if not, the relief available to Ruckman was limited to the specific heads of loss not the entire settlement sum.
This was a particularly important issue as, on Ruckman’s construction of s48, any aspect of unreasonable payment would operate to invalidate the entitlement to recovery for the entire quantum.
The most reliable evidence of the breakdown of the settlement sum into heads of damage was a letter from Suncorp’s solicitor to Suncorp reporting following the compulsory conference.
Suncorp made an allowance for future earning capacity of $500,000. Brettes was a waiter in France earning about $450 per week prior to the accident. The medical evidence to hand at the time of the settlement concluded that Brettes would not be able to engage in that type of work again, and he would need to retrain for an office job. However, Ruckman established that Brettes had obtained employment as a waiter in Europe as early as March 2007 (about two years post accident) and that the information came to light at the conference.
The court found that a cost is not reasonably incurred by an insurer if the claim is paid upon a basis which has been demonstrated to be incorrect. That would still be the case even where the information becomes available at the compulsory conference (as it did here). The Court found that Suncorp, on becoming aware of the radical difference, should have sought further information and made further inquiries. The costs incurred by Suncorp in relation to future economic loss were found not to be reasonable and not recoverable against Ruckman.
The range of damages for future out of pocket expenses estimated by Suncorp’s solicitor was $140,000 to $175,000. A French practitioner and an occupational therapist had given opinions with respect to the need for future aids. The solicitor’s advice to Suncorp had made his own assessment and did not consider the occupational therapist’s report or the French practitioner’s report. Ruckman argued the approach by Suncorp was unreasonable but the court rejected the submission and was satisfied that the amount assigned to future out of pocket expenses was supported by evidence.
The court found that the solicitor’s assessment of quantum was accurate, as there was no material which suggested that Brettes would not suffer from problems caused by the accident that would require care.
Ruckman also unsuccessfully argued that the categorisation of the claim by Suncorp as a catastrophic claim, coloured the view taken by Suncorp with respect to the matter. The court found the evidence did not support that and the reasons for categorising claims in such a way are obvious.
The most significant aspect of the decision was in rejecting Ruckman’s submission that as the quantum of the economic loss was not reasonably incurred the recovery in total was unavailable. Rather the court held that the entitlement to recover costs was appropriately reduced by the extent of the portion of the costs unreasonably incurred, holding that on a proper construction of the section, the word ‘costs’ to be defined to include separate categories of costs rather than a global amount.
Ultimately, the court gave judgment for Suncorp in the amount of $764,567.22. This was comprised of the total amount paid in respect of Larrasquet’s claim, plus $721,567.22 ($1,221,567.22 less $500,000 for future economic loss) for Brettes’ claim.
The court found that it is possible for a payment made by an insurer to an injured person to be reasonably incurred as to one head of damage, and unreasonably incurred as to another.
The decision confirms that in recovery actions pursuant to s58 of the MAIA, the insurer must have incurred the costs reasonably in paying an injured party, otherwise they will fail to recover unreasonably paid heads of damage from the insured.
Authored by Jane Hibberd, Lawyer, Brisbane.
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