Court appeal backs third party

A decision handed down in the Court of Appeal in the Supreme Court of New South Wales has cleared the path for most third party claims to go unchallenged.

AS A RESULT of the decision, third party claimants may choose their repairer who, in turn, can charge ‘fair and reasonable’ repair costs without being challenged on the grounds that the at fault’s insurer could have had them done at a lower price.
Solicitor and former repairer, George Elmassian, last year wrote the story of the original case in which Allianz paid for a third party repair and then claimed it back from the at fault’s insurer, AAMI. When AAMI refused to pay the claim of $14,197.67 plus GST on the basis that it was ‘extravagant’ the case went to court ‘ more as a test case than simply a settlement between insurance companies.
In the original case, AAMI lost, but lodged an appeal. It then lost that appeal and, in doing so, has lead to a court interpretation of the law which has made third party claims much less open to challenge.

THE ORIGINAL CASE

The plaintiff was insured with Allianz and the defendant with AAMI. Following the accident, the plaintiff contacted Allianz and lodged a claim. The repairer’s invoice came to $14,197.67 plus GST. Allianz paid the repairer and then made a claim against the defendant, who was indemnified by AAMI.
AAMI admitted liability for the collision and admitted liability for the loss and damage suffered by the plaintiff but denied the cost of repairs on the grounds that they were not ‘fair and reasonable’ to reinstate the vehicle to its pre-accident condition.
Allianz brought proceedings against the defendant in the Local Court and the matter was referred to the Supreme Court, where the court considered two questions:
1. Is the plaintiff entitled to damages from the defendant which indemnifies him for the actual cost of repairs for the motor vehicle referred to in the estimate’

2. If so, can the defendant’s liability for damages to indemnify the plaintiff for the actual costs of repairs to the motor vehicle, be reduced to the extent that the actual cost of repairs were not ‘fair and reasonable’ and/or were ‘extravagant’’
In finding for the plaintiff (Allianz) The Judge held a plaintiff is entitled to damages from the defendant which indemnifies him for the actual cost of repairs to the motor vehicle. The Judge said the cost of repairs to the motor vehicle cannot be reduced unless the costs are extravagant.

AAMI did not agree with the findings of the Judge and chose to appeal the case to the Court of Appeal in the Supreme Court of New South Wales.

AAMI stated its position as follows: Where a person makes a claim for the recovery of loss from a motor vehicle accident then there are two constraints which need to be considered: the amount claimed by the plaintiff, or the person not at fault, should not exceed the actual cost to them, and the amount of damages recovered could not exceed the reasonable cost of undertaking the repairs.

Allianz said it was established that particular repairs were necessary to repair a vehicle so that vehicle would be put back to the state it was in prior to the accident. Then so long as the cost of repairs was not extravagant, then it was not necessary for the court to determine whether the cost was ‘fair and reasonable’. In such circumstances the plaintiff is entitled to recover the actual cost of repairs.

THE JUDGMENT

1. The Judge treated extravagant and unreasonable as synonymous ‘ since 1856 the Courts and commentators have always treated extravagant and unreasonable in this context as interchangeable.

2. There is likely to be a range of costs all of which are fair and reasonable. Simply because there is evidence that a lower cost would be fair and reasonable, does not mean that a higher cost is outside the range and therefore not fair and reasonable. It is only when the actual cost of repairs is outside the range of being fair and reasonable that it becomes extravagant or unreasonable,

3. Such a formula may appear to establish an entitlement for the plaintiff to be indemnified by the claimant for the actual cost of repairs without any restriction based on the reasonable cost of repairs. However this is not the case.

4. The plaintiff is not entitled to recover more than his actual cost, and he is not entitled to recover that cost to the extent that it was extravagant or unreasonable.

ELMASSIAN COMMENTS

What does this mean for the repairer and the consumer’
A client who is not at fault and can identify the third party at fault may claim directly against the third party without having to claim on his own insurance policy.
Unfortunately, as many repairers have experienced, insurance companies still insist on directing third party repairs to their own preferred repairers, not giving the client a choice of repairer, or not paying the correct amount to have the vehicle reinstated to its pre-accident condition.
However, it is a client’s right to choose the repairer of his choice and for the repairer to chose the correct method of repair and get paid the correct amount to have the vehicle repaired. As a result of the decision in the Supreme Court of Appeal, it is clear that there is a range of estimates that are all ‘fair and reasonable’. Insurance companies simply cannot argue that the repairs are not ‘fair and reasonable’ because they say and that the repairs could have been repaired at a cheaper price.
For an insurance company to dispute the cost of repairs to a motor vehicle, they must produce evidence and show that the cost of repairs as estimated and assessed by the independent assessor was extravagant and unreasonable.
For the repairer and the consumer this now creates a fairer playing field. For repairers whose clients have chosen to have their vehicle repaired though a third party recovery agent, the repairers can be confident of being paid the actual cost of repairs and not feeling threatened or intimidated that their estimates are not ‘fair and reasonable’.
For the consumer, they can use their own judgment, experience and discretion in selecting the repairer of their choice.
For the Insurance companies, no longer can they stand up before the courts and argue that they could have had the repairs undertaken at a cheaper price.