To be (In) Sure(ed) Does Your Insurer Need a Push off its Perch?

The Australian climate is ever tumultuous and less predictable than ever.

Whilst this may equate to leaving home with an umbrella more often than usual, it should also prompt consideration of the family home or investment property, and the inclement conditions it may subjected to.

The insurance industry has felt the impact of several severe weather events. Indeed, there have been seven separate weather events in the last two years characterised as catastrophic weather events by the Insurance Council Australia. These catastrophic weather events have had dire consequences for families across Australia, with several thousand homes being destroyed beyond the point of repair.

So, with no indication of weather patterns becoming any less volatile, it is reasonably foreseeable that the number of general home and contents insurance claims will continue to increase. On its face, this does not present any ostensible consequences for the consumer, but is this really so?

Of late we have seen an influx of clients with disputes against their respective insurance companies for home and contents claims. These disputes most commonly involve a claim that an insurer has partially denied or completely denied. The frequently relied upon grounds for the denial of a claim include the following:

  1. wear and tear;
  2. maintenance issues (lack of maintenance); and
  3. building defects.

The above grounds are often included in the general exclusions of a home and contents insurance policy. At first glance they appear to be fair. A homeowner should bear the onus for maintenance and has a responsibility to ensure their building is compliant with the applicable regulations. However, we have witnessed several insurance companies seeking to rely on such exclusions to deny claim without a proper basis to do so. This is not fair.

The suggestion that insurers seek to limit their liability in respect of claims is not new. After all, insurance companies profit from insurance premiums, and if they are required to pay out an exorbitant number of claims, their bottom line suffers, which equates to shareholder dissatisfaction and increased pressure on executives.

Insurance companies spend millions of dollars each year obtaining reports from builders, engineers, and other experts to assess claims. In our experience, often the contractors engaged by insurers’ are seeking to identify reasons to deny coverage to claims, rather than accurately assess the damage created by an insured event. This amounts to conduct contrary to the true intention of a contract of insurance, which is to indemnify the insurer against loss and damage suffered.

Thankfully, insurance companies are bound by various laws and regulations. First and foremost, insurance companies Australia wide are required to comply with various operative provisions of the Insurance Contracts Act 1984 (Cth) (“the Act”). Section 13 of the Act gives rise to an insurers’ duty to deal with an insurance contract in the utmost good faith.  A breach of this duty amounts to a breach of the insurance contract, as well as a breach of the legislation. Significant civil penalties apply to companies involved in any such breach, but nonetheless they are (based on our experience), happy to tread a fine line.

The High Court of Australia heard the matter of CGU v AMP [2007] HCA 36 which was highly instructive on the matter of utmost good faith. In that matter the High Court described the duty owed by insurers’ as the requirement to “act, consistently with commercial standards of decency and fairness, with due regard to the interests of the insured”. This is significant. Insurance companies are required to act in a fair and decent manner.

Fair and decent conduct encompasses rightfully acknowledging that customers may not have known of pre-existing defects or imperfections to their property. Section 46 of the Act requires insurers’ to cover claims which may have been otherwise declined in circumstances where the customer was reasonably unaware of a pre-existing defect or imperfection. However, all too often insurers’ misinterpret this clause and have unrealistic expectations of a customer’s knowledge of building defects.

As well as being aware of an insurers’ duties in assessing your claim, it is important to be aware of your entitlements in a successful claim. Section 57 of the Act stipulates that where an insurer is liable to pay a person an amount under a contract of insurance (i.e., in the event of a successful claim), the insurer is liable to pay interest on the amount. Turning to regulation 10 of the Insurance Contracts Regulations 2017, the applicable interest rate is confirmed as 11%. This is a significant amount, particularly when you are receiving a large claim settlement.

In view of the several legal complexities inherent to insurance claims, it is absolutely essential that you contact our firm if a dispute arises. We have extensive experience in identifying errors made by insurance companies and obtaining improved results for our clients. An intricate knowledge of the Act and relevant case law has proved to be instrumental in obtaining great outcomes.

Some of our recent results in this area involve disputing an insurance claim where our client was originally offered a settlement figure of $16,000. Our client’s claim was for storm damage, and the insurer sought to rely on lack of maintenance and wear and tear on the roof of the property to partially deny the claim. We were able to identify that the home was unsafe through the briefing of experts and our client was immediately put in temporary accommodation, paid for by the insurer, for a period of 9 months. After continued negotiations with the insurer, our client received a revised offer of $415,000. With the view that this was still less than what our client was entitled to, we commenced proceedings in the Supreme Court of New South Wales and shortly thereafter received an increased offer of $505,000 which was accepted by our client. 

Storm claims have been prevalent of late, as have flood and landslide claims. In a separate matter, we were instructed by our client that their investment property was severely damaged by flooding. The insurer cited various grounds for the outright denial of the claim which we considered to be inadequately supported by the evidence available. We engaged experts and commenced proceedings in the District Court of New South Wales highlighting the aspects of the damage which gave rise to the insurer’s duty to offer coverage. In relatively quick time, the insurer made an offer of $150,000 which was subsequently accepted by our client.

We know that having a damaged home is extremely stressful. If you are of the view that your claim has been mishandled and the outcome delivered is unjust or unfair, please contact us today to discuss your dispute.

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