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Determination
Case number | 12-00-1085716 |
Financial firm | The Hollard Insurance Company Pty Ltd |
Case number: 12-00-1085716 24 October 2024
The complainant holds a business insurance policy with the financial firm (insurer). In January 2024, the complainant lodged a claim under the policy for heat related damage to pool covers that occurred when they were stored outside in shipping containers.
The insurer says a policy exclusion for any loss or damage caused by variation in temperature applies.
The complainant is represented by his insurance broker. I have referred to both as ‘the complainant’ in this determination.
It is fair for the insurer to deny the claim. This is because both parties agreed to be bound by the terms and conditions of the policy. The policy includes an exclusion for loss or damage caused by variation in temperature, which the insurer has established applies in this case.
This determination is in favour of the insurer.
The insurer is entitled to deny the claim. It is not required to take any action.
Yes. The insurer has shown that a relevant policy exclusion applies.
It is accepted insurance law that an insured person has the initial onus to establish, on the balance of probabilities (that is more likely than not), that the loss or damage claimed falls within cover provided under the policy. Where this is established, the onus shifts to the insurer to establish the application of a relevant condition or exclusion.
There is no dispute that the complainant was provided with the policy documents.
The policy schedule confirms the complainant obtained cover for ‘Property Damage’. This provides broad cover for physical loss or damage to the insured property during the period of insurance. The cover is subject to various policy exclusions.
In January 2024, the complainant lodged a claim for damage to pool covers caused by heat when they were stored outside in shipping containers for several weeks over Christmas and New Year.
There is no dispute that the complainant’s property sustained heat damage.
Given the very broad insuring clause, I am satisfied the complainant has established a claimable loss under the policy.
As the complainant has established a claimable loss, the insurer must establish a relevant exclusion applies if it is to deny the claim.
In this case, the insurer relies on an exclusion for loss or damage caused by variation in temperature to deny the claim. The relevant exclusion is quoted in section 3.2 of this determination.
The insurer says the complainant’s pool covers were heat damaged because they were outside in shipping containers when the external temperature was sometimes over 25, and the temperature within the containers was likely 50 degrees or more.
The insurer relies on:
research that says:
> the internal temperature of shipping containers can reach 60 degrees or more as metal walls heat up when exposed to direct sunlight
> external temperatures of 25 degrees can cause an internal temperature in shipping containers of 50 degrees (the ‘oven effect’)
> the damaged pool cover fabric is low density polyethylene (LDPE), that has a mould temperature range of 20-60 degrees where it becomes pliable.
Bureau of Meteorology observations that show it was more than 25 degrees on some days in the relevant time and place. For example, the observations indicate it was 28.4 degrees on 18 December 2023, 27.4 degrees on 5 January 2024 and 31 degrees on 6 January 2024
the pool cover supplier agreed the pool covers showed signs of heat stress/damage, consistent with a change in temperature.
The complainant acknowledges the damage was caused by heat. He says:
rolls of blanket fabric were exposed to heat. [A]s a result the flat edges along with parts of the rolls have warped and melted. [T]his renders the [fabric] useless as the flat edges are required to weld the fabric together to make larger panels.
But the complainant says:
the damage was caused because the shipping containers were left outside (not variations in temperature)
cover should be afforded because leaving the covers in shipping containers in irregular circumstances was an accident
the shipping containers holding the pool covers were ventilated and were only outside for three weeks when the temperature was stable.
I am satisfied the insurer has established the damage to the pool covers was, on balance, caused by variations in temperature. This is because:
the complainant confirms the shipping containers containing the pool covers were moved from the factory to the yard, where they were located for three weeks over the Christmas and New Year period
the parties agree the pool covers are heat damaged, and so does the product supplier
the heat damage to the covers is consistent with:
> the insurer’s research about the impact of high temperatures on LDPE
> the Bureau of Meteorology’s observations that show variations in temperature, including days where it was over 25 degrees in the relevant time and place
> the insurer’s research about the ‘oven effect’ that causes significantly higher internal temperature within shipping containers.
I acknowledge the complainant says the temperature was stable in the relevant period, with no extreme variations. But the policy exclusion does not specify that variations in temperature must be extreme. In this case, the pool covers were exposed to variations in temperature when the shipping containers were moved from the factory to the yard, and when they were subjected to variations in the external temperature. These variations include an increase in temperature sufficient to cause damage to the covers.
I also acknowledge the complainant says the shipping containers were ventilated. But the temperature in the shipping containers had clearly increased to a high enough temperature to cause the damage regardless of whether they were ventilated or not.
Therefore, the insurer has established a relevant policy exclusion applies and it is entitled to deny the claim.
It is fair for the insurer to deny the claim. This is because both parties agreed to be bound by the terms and conditions of the policy. The policy includes an exclusion for loss or damage caused by variation in temperature, which the insurer has established applies in this case.
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.
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 will not cover You for loss or damage caused by:
…any form of fungus, wet or dry rot, dampness of atmosphere, variation in temperature, evaporation, disease, shrinkage, change in colour, flavour, texture or finish unless directly caused by a peril or event covered under this cover section
