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Determination
Case number | 948462 |
Financial firm | Hollard Insurance Partners Limited |
Case number: 948462 7 May 2024
The complainant holds a home building and contents insurance policy underwritten by the financial firm (insurer). He lodged a claim for fire damage to his home from 7 October 2021.
The insurer originally declined the claim for non-disclosure. However, it has since agreed to cover the loss after a complaint was lodged with AFCA.
The complainant now disagrees with the insurer’s settlement offer. He says he was misled when the policy was sold to him and seeks additional funds to rebuild his home. The complainant also seeks payment for legal fees and additional compensation.
The insurer is required to pay $415,937.98 less any amounts it has already paid to the complainant and any policy deductions.
The insurer is not required to increase its offers for the building or contents sums insured. Its settlement offer was generally fair. However, it must include the demolition costs as it has not shown these costs are excluded under the policy. The insurer is otherwise entitled to restrict its settlement offer as it has done, inclusive of offers for compensation ($5,400) and legal costs ($5,000).
The outcome is fair as the exchanged information shows, on balance:
the complainant received a copy of the policy documents at inception
he was not misled by the insurer’s authorised representative
the authorised representative did not induce the complainant to underinsure his property
the insurer has already offered to cover most of the claim.
This determination is mostly in favour of the insurer.
The insurer is required to pay the complainant $415,937.98 less any amounts already paid and any policy deductions. This amount is inclusive of interest.
The complainant is represented by a solicitor. For convenience, unless context requires otherwise, reference to ‘the complainant’ will include both.
The insurer is required to pay $415,937.98 less any amounts it has already paid to the complainant and any policy deductions.
The insurer is not required to increase its offers for the building or contents sums insured. Its settlement offer was generally fair. However, it must include the demolition costs as it has not shown these costs are excluded under the policy. The insurer is otherwise entitled to restrict its settlement offer as it has done, inclusive of offers for compensation ($5,400) and legal costs ($5,000).
The complainant lodged a claim for fire damage to his home. It is not in dispute the home was destroyed by a fire or that the policy provides cover in such circumstances.
The insurer originally denied the claim for non-disclosure at inception. The insurer has since agreed to accept the claim. At the time of the fire, the complainant’s home was insured for $240,350 and the contents for $10,300.
On 22 August 2023, the insurer finalised its settlement offer, proposing to pay:
$300,437.50 for building damage and $12,875.00 for contents, less $28,397 for council demolition fees. This meant a net settlement of $284,915.50 (inclusive of 25% Gap cover)
$38,108.24 interest
$25,720.24 for additional temporary accommodation costs
$5,400 compensation for non-financial loss
$5,000 for the representative’s professional fees.
The complainant did not accept the offer as presented by the insurer. He says the home and contents were underinsured and believes the settlement amount should be increased.
The policy was sold through a bank, which also provided the complainant a loan for the insured property. The bank acted under a binder to the insurance policy underwriter at the time, which is now underwritten by the insurer.
The bank used an employee, which acted as an authorised representative (AR) to incept the policy. Given the insurer does not suggest the AR acted outside his remit, the panel accepts the insurer is bound by any actions and undertakings of the AR made during the underwriting process. This means, to the extent the AR made an error, the insurer is liable for it.
The complainant, though his solicitor, says he ‘retained’ the bank and the AR to ‘provide him with insurance advice about the entry into a home insurance policy’.
During the meeting on 11 September 2021, the complainant says the AR:
provided financial advice about purchasing the policy
undertook to ‘fix everything up’ for the cover
failed to ‘make reasonable enquiries’ into the complainant’s financial position to ensure the complainant’s personal circumstances were adequately reviewed and considered
failed to ensure the policy documents were provided or to arrange for them to be sent to the complainant’s correct address.
The AR no longer works with the insurer and it was unable to obtain a statement about the interaction. None of the exchanged material persuasively states or implies the AR intended, sought or was meant to provide personal advice to the complainant about the insurance cover.
Whilst the complainant says the AR undertook to ‘fix everything up’ for the cover, the panel is not satisfied he provided sufficient detail to show he received personal advice.
The panel is also satisfied the complainant was provided with a copy of the Product Disclosure Statement (PDS) and Certificate of Insurance (COI) at the point of sale. These constitute the policy documents. In the complainant’s record of interview with the insurer’s representative on 13 December 2021, they had the following exchange:
Q213 Did you receive your insurance policy and product disclosure statement?
A213 Yes, but I don’t have it.
Q214 Yep. Did you read it and check that all the information contained in it was correct?
A214 Yes, mate.
Q215 Did you note any errors?
A215 No, mate.
The panel accepts this means the complainant received the COI and PDS at inception.
The COI confirmed the policy provided building cover for $230,000 and contents cover for $10,000. This cover was for less than the building or the contents were worth. The complainant confirmed his understanding of this in the same interview:
Well, mate, I never thought – like, I never expected anything like this to happen, so I obviously underinsured a few things there, like, I should insure at the right, like, cost of everything because… that’s not going to happen ever. So, I just underinsured so I can, like, pay less obviously.
Based on the exchanged information, the panel accepts:
the complainant incepted the policy through the AR
he did not receive personal or financial advice for the policy
the AR was not required to provide this advice to the complainant and there is no persuasive evidence he sought or believed he was receiving such advice
he underinsured the building and contents to save money on the premium
by receiving the policy documents at inception and electing to underinsure his home and contents, the complainant was aware the level of cover was less than it could have been
the insurer is not responsible for this.
It is less certain the complainant received the policy documents at renewal, noting the insurer had the policy mailing address as the complainant’s former address. It is not known why this was the case, although the panel notes the complainant was living at this address when he originally took out the loan, and records may not have been updated.
However, the panel considers nothing of note turns on this issue. The complainant received the policy documents at inception and was aware of the cover. The cover limits increased at renewal, so the complainant was not disadvantaged.
Given this, the panel is satisfied the AR did not induce the complainant to underinsure his property or otherwise mislead the complainant. The insurer may rely on the policy limits in settling the claim. It is not required to increase its offer in relation to the sums insured.
As part of its claim, the complainant sought cover for $28,397 in relation to council demolition fees. These fees were incurred to clean the site, which remained partially destroyed and dangerous after the loss.
The panel accepts the home was left in a dangerous state for an extended time, noting the insurer initially intended to refuse the claim. The panel is satisfied if it intended to cover the loss from the outset, the insurer would likely have accepted this cost would have been payable under the additional benefit of ‘Demolition and debris removal costs’. Further, the delay caused by the investigation meant that the complainant’s home was left untouched and the council ultimately deemed this untenable. It cleared the land.
The panel is satisfied these costs were reasonably incurred. The insurer has not persuasively shown why it believes it should not be liable for the costs.
Based on the prior review of the policy inception process, the panel accepted the insurer provided the 2019 PDS at inception. The insurer did not show, on balance, it provided the 2021 PDS. This went to a prior address. This means the 2019 PDS is relevant to this issue.
The panel notes the insurer cited no specific clauses in either PDS to show why it is not liable for this payment. However, the 2019 PDS says the building sum insured is inclusive of GST and:
all improvements (for example garages, driveways and verandas). You should also include an amount for all associated rebuilding costs such as architectural, engineering, surveying, construction fees and legal expenses.
The above does not reference ‘demolition and debris removal costs’ (which the 2021 PDS does). Given this is described as an additional benefit, the panel accepts the insurer must cover this expense. If the insurer has not already covered this payment, the panel accepts it must do so. This amount is payable in addition to the building sum insured.
The insurer agreed to cover the complainant’s request for temporary accommodation costs of $25,720.24 on 22 August 2023.
There is no evidence the complainant rented out the property or that he wanted to. No specific evidence of a loss was provided either.
As the parties agreed to this settlement, the panel is satisfied it should be paid. However, the panel also accepts there should be no ongoing consideration for interest.
The insurer agreed to pay the complainant legal costs of $5,000. The complainant seeks $27,500 in legal costs.
The complainant seeks additional legal costs on the basis that:
the matter involved ‘complicated legal issues’ and the solicitor’s involvement ‘materially assisted in securing a favourable outcome’
the complainant:
> suffers from a cognitive impairment and mental health issues
> did not have the capacity to represent himself
> was temporarily incarcerated meaning representation was necessary, and
> ultimately left homeless when his incarceration ended.
The panel acknowledges legal representation and assistance was of value to the complainant. However, the panel is satisfied the offer made is fair in the circumstances.
Under D.5 of the AFCA Rules, we may decide that a financial firm is to contribute to legal or other professional costs. Unless special circumstances apply, AFCA will not require a financial firm to contribute more than $5,000.
In this instance, the panel is not satisfied the complainant has demonstrated the extent of his ‘cognitive impairment’ and how this impacted his ability to understand issues or represent himself. No medical evidence was provided to show the complainant was unable to self-represent.
Further, the panel notes the insurer had strong grounds to investigate the claim. Whilst the insurer ultimately chose to settle the complainant, the panel accepts the stated offer for legal costs is fair. The panel is not satisfied special circumstances apply or that an additional payment is required in this instance.
The complainant sought interest on the offered settlement of $38,108.24. The insurer agreed to pay this amount.
Whilst the offer was made on 22 August 2023, the panel notes this was based on payment of interest from 28 October 2021. It was also based on a calculated interest rate of 6.5%. The panel accepts the insurer’s submission that the correct date from which interest should apply is 29 September 2022. This is the date the claim was denied by the insurer. This means the correct interest rate is 6%.
This means the full interest payable on the claim, even accounting for the time elapsed since the offer, is less than what the insurer agreed to pay.
Given this and noting the insurer accepted the offer, the panel is satisfied this offer is fair. The insurer is not required to increase its offer for interest.
The insurer offered to pay the complainant non-financial loss compensation of $5,400. This is the maximum amount which can be awarded for a claim.
The panel is satisfied the offer is fair. The insurer is not required to increase the offer.
Based on the exchanged material, the panel is satisfied the insurer’s proposed settlement of the claim is substantively fair. The only additional amount the insurer is required to pay is for the demolition costs.
The settlement therefore includes:
$300,437.50 for building damage
$12,875.00 for contents
$28,397 for council demolition fees
$38,108.24 for interest
$25,720.24 for additional temporary accommodation costs
$5,400 compensation for non-financial loss
$5,000 for the representative’s professional fees.
Given the issues noted above, including the generosity of the settlement, the panel is satisfied there is no need to award further interest payments.
The insurer must pay a total sum of $415,937.98 to resolve the complainant’s claim, less any amounts it has already paid and any policy deductions.
The outcome is fair as the exchanged information shows, on balance:
the complainant received a copy of the policy documents at inception
he was not misled by the insurer’s authorised representative
the authorised representative did not induce the complainant to underinsure his property
the insurer has already offered to cover most of the claim.
AFCA has determined this complaint based on what is fair in all the circumstances, having regard to:
the legal principles
applicable industry codes or guidance
good industry practice
previous decisions of AFCA or its predecessor schemes (which are not binding).
The respective parties have completed a full exchange of the relevant information, and each party has had the opportunity to address any issues raised. We have reviewed and considered all of the information the parties have provided.
While the parties have raised a number of issues in their submissions, we have restricted this determination to the issues that are relevant to the outcome.
Due to the nature of this complaint, we referred it to a panel for determination. The panel includes:
an ombudsman
a member with significant experience in consumer and small business advocacy
a member with extensive industry experience.
AFCA is not a court of law. We do not have the power to take or test evidence on oath, or to require third parties to give evidence.
When we assess complaints, we consider:
available documents
the recollections of the parties
all relevant circumstances.
We give more weight to documents created at the time the events occurred. If there are no relevant documents, we will decide what most likely occurred based on the available information.
If there are conflicting recollections and these are evenly weighted, we may find that a claim cannot be established.
