The Supreme Court handed down its decision in CIC Allianz Insurance Limited v Erturk on 21 April 2010.

The insurer in that matter sought review of a decision by the Principal Claims Assessor refusing to grant a Mandatory Exemption under s 92(1)(a) of the Motor Accidents Compensation Act 1999. Judicial review was also sought of a decision by a Claims Assessor to refuse an Application for Discretionary Exemption under s 92(1)(b).

The central issue in dispute was whether the insurer was bound, within the CARS process, by a Section 81 Notice which mistakenly admitted fault.

The background facts were that an experienced and well regarded Claims Manager made a simple error, in the context of a busy portfolio of files, and issued a Section 81 Notice which admitted fault in circumstances where there were viable reasons to place negligence in issue. There was no dispute in the proceedings that the mistake was an honest one, arising from human error.Upon discovering the error, the insurer sought to serve an Amended Section 81 Notice denying fault. The insurer then sought a Mandatory Exemption under s 92(1)(a) on the grounds of the denial contained in the Amended Section 81 Notice. In the alternative, the insurer sought a Discretionary Exemption under s 92(1)(b) on the grounds that there was a complex legal issue with regard to whether the insurer should be held to the first Section 81 Notice.

In respect of the Application for Mandatory Exemption, the PCA held that the first Section 81 Notice was a valid Notice and concluded that the insurer was bound by the admission contained in that Notice whilst in the CARS process, and, as such, there were no grounds for Mandatory Exemption under the Guidelines.

The decision in CIC Allianz Insurance v Erturk confirms that an insurer cannot depart from a Section 81 Notice, admitting fault,whilst within the CARS process.

The Court of Appeal held in The Nominal Defendant v Gabriel [2007] NSWCA 52 that, once proceedings are commenced, the defendant may file a Defence inconsistent with the Section 81 Notice previously issued by the relevant CTP insurer.

However, unless or until a matter finds its way to court, a Section 81 Notice issued by the insurer conclusively certifies the liability status of the claim and is "set in stone".

The decision in Erturk emphasises that an insurer remains bound by its Section 81 Notice even where there is no dispute that the content of the Notice was produced through an honest mistake.

In the meantime, the decision in Erturk underscores the importance of taking great care in the preparation of Section 81 Notices.