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Determination
Case number | 12-00-1001277 |
Financial firm | RACQ Insurance Limited |
Case number: 12-00-1001277 15 July 2024
The complainants hold home building and contents insurance with the financial firm (insurer). They lodged a claim following a fire on 22 December 2022.
The insurer accepted the claim and attended to repairs. After its restorer disposed of contents deemed restorable, the insurer paid out the $323,000 contents sum insured. It also paid $67,088 in temporary accommodation (TA) costs - $13,288 over the TA policy benefit limit.
The complainants say the insurer did not adequately remediate the two kitchens in the home. They want the insurer to pay for replacement of both kitchens, cover additional TA costs, and pay them compensation for stress and inconvenience.
On 15 July 2024, the complainants advised AFCA they had replaced both kitchens, and disposed of the old materials. The insurer says it was unaware that had occurred.
No. The insurer did not satisfactorily complete heavy metal testing in the downstairs kitchenette. However, further testing and potential additional remediation cannot be arranged as the kitchenette has been replaced with the removed aspects destroyed. On balance, the upstairs kitchen was appropriately remediated.
No. The insurer has already paid well over the TA costs policy limit, including for eight weeks after the upstairs area of the home was certified as having been appropriately remediated.
Yes. The uncertainty about the kitchenette’s remediation caused the complainants stress and inconvenience. Further, the disposal of restorable items resulted in them losing irreplaceable items of high sentimental value. It is to pay the complainants $3,000 each in compensation.
The insurer has paid well over the TA costs limit, so it would be unfair to require it to pay further TA costs. It is fair the insurer compensates the complainants for stress it caused through not satisfactorily investigating the kitchenette’s remediation status and by disposing of contents items unnecessarily.
This determination is partially in favour of the complainants. Within 14 days of receiving written notice the complainants accept this determination, the insurer is to pay each complainant $3,000 in compensation ($6,000 in total).
The complainants previously sought payment of amounts for contents above the contents sum insured but have confirmed they no longer do so.
No. The insurer did not satisfactorily complete heavy metal testing in the downstairs kitchenette. However, further testing and potential additional remediation cannot be arranged as the kitchenette has been replaced with the removed aspects destroyed. On balance, the upstairs kitchen was appropriately remediated.
Subject to the terms and conditions set out in the product disclosure statement (PDS), the complainants’ policy covers their home and contents for damage caused by a listed insured event. Those events include ‘Fire’. The complainants’ policy also covers accidental damage to the home.
On 22 December 2022, the complainants lodged a claim for fire and smoke damage to their home and contents. The fire was caused by an e-scooter’s lithium battery igniting while being charged in the downstairs rumpus room.
The insurer accepted the claim under the Fire insured event, but a dispute has arisen as to the extent and adequacy of the insurer’s building repairs. In particular, the parties disagree on whether the insurer properly remediated the upstairs kitchen (kitchen) and the downstairs kitchenette (kitchenette).
The insurer attended to repair and remediation work, including to the kitchen and the kitchenette. On 20 September 2023, the complainants signed a completion report for approved building repairs performed by the insurer’s builder AR.
On 29 May 2023, hygienist RI provided a report to the insurer following heavy metal sampling from various upstairs and downstairs locations within the home, including the kitchen’s benchtop and pantry, and a kitchenette drawer. The samples were tested for arsenic, cadmium, chromium, copper, nickel, lead, and zinc. Elevated copper and nickel levels were identified. RI recommended further remediation, then reassessment.
Following additional remediation works, RI undertook a reassessment on 16 June 2023. On 20 June 2023, RI provided a post remediation verification certificate (certificate). The ‘scope area’ was the upper floor. Amongst other things, the certificate stated that ‘all remaining surfaces and materials related to the claim have been cleaned to a satisfactory level’.
On 20 June 2023, RI undertook further heavy metal sampling. Its report dated 4 July 2023 indicates seven samples were taken from upstairs, including the kitchen bench, island return, exposed chipboard on the cupboard door, and pantry. The testing was for the same metals the subject of RI’s report dated 29 May 2023, plus mercury. RI concluded:
The conducted sampling for heavy metals indicates remediation has been completed successfully, returning levels appropriate to the indoor environment.
On 12 July 2023, RI provided additional written commentary to the insurer. RI said:
In the circumstances, the insurer says the kitchen and kitchenette have been appropriately remediated.
The complainants say that they cannot afford expert reports of their own. However, complainant R says he has relevant experience, including in sampling of surfaces and in evidence collection.
The complainants point out that the insurer’s restorer, CR, confirmed there was extensive lithium battery contamination by fire-related residue, which was toxic due to the heavy metals used in lithium batteries. CR highly recommended an appropriately qualified hygienist be appointed to inspect for lithium contamination.
R says the representatives from RI involved in the claim had no experience with lithium battery fires. Instead, their expertise was in dealing with mould and microbial issues. He says that as a result, RI’s reports are unreliable.
The complainants note the kitchenette was only tested once and not after the further remediation. The sample taken was from a drawer rather than on a bench. The kitchenette was never tested for mercury, despite being much closer to the fire than the kitchen.
Further, the complainants submit that the insurer:
The complainants say that in the circumstances, it is appropriate that the insurer pay the cost of replacing the kitchen and the kitchenette.
Based on the exchanged information, I am satisfied that the insurer did not complete adequate heavy metal testing in the kitchenette. This is because:
Prior to being advised on 15 July 2024 that the complainants had replaced the kitchenette, I would have been satisfied that the insurer should arrange heavy metal testing of areas of the kitchenette and attend to any additional remediation identified as being reasonably required. However, that is no longer possible, with the old kitchenette materials having been disposed of by the complainants.
As I cannot know what further testing of the kitchenette would have shown, I am not satisfied it would be reasonable to require the insurer to pay an amount towards its replacement cost. I also note that no invoices or other documents have been provided in relation to those costs.
In the circumstances, I will take into account the insurer’s inadequate testing of the kitchenette in assessing the complainants’ entitlement to non-financial loss compensation.
The insurer’s investigations in relation to the kitchen were adequate because:
No. The insurer has already paid well over the TA costs policy limit, including for eight weeks after the upstairs area of the home was certified as having been appropriately remediated.
As set out on page 59 of the PDS, the policy covers TA costs after an insured event renders the home unfit to live in. The costs include:
The PDS confirms on page 41 that the maximum amount payable for TA costs is 10% of the building sum insured. In the complainants’ case, this means the TA costs limit is $53,800.
The insurer says most of the TA costs sum insured was used by arranging two caravans for the complainants and their family on their property while remediation works were undertaken.
The insurer notes RI’s certificate dated 20 June 2023 confirmed the upstairs area of the home had been appropriately remediated. That area includes the kitchen, three bedrooms, a bathroom, an ensuite, a living room, a dining room, and a laundry. The insurer says it nevertheless agreed to extend the caravan hire until 21 August 2023.
The insurer says that it paid a total of $67,088 in TA costs, $13,288 over the applicable limit. It says it would be unreasonable to require further TA costs to be paid.
The complainants say that the insurer wasted a minimum of ten weeks of their TA costs entitlement. This was through delays caused by the insurer’s investigations aimed at avoiding having to replace the kitchen and kitchenette. They submit that the insurer should pay further TA costs to the point when the kitchen and kitchenette were replaced.
I am not satisfied that it would be reasonable to require the insurer to pay additional TA costs given that:
Yes. The uncertainty about the kitchenette’s remediation caused the complainants stress and inconvenience. Further, the disposal of restorable items resulted in them losing irreplaceable items of high sentimental value. It is to pay the complainants $3,000 each in compensation.
It is not in dispute that the insurer’s restorer disposed of many restorable contents items. The complainants say this meant they lost irreplaceable items of high sentimental value, including belongings of their late fathers. They also consider the insurer’s claim handling was poor, with many instances of delay, lack of responsiveness, and incompetence.
The complainants say the insurer has caused them both major stress and inconvenience and has significantly contributed to a worsening of their mental health.
The insurer maintains that it’s claim handling has been reasonable overall. It says it empathises with the complainants with respect to the disposal of sentimental items, and notes that this was a factor taken into account when it paid out the contents sum insured.
While there do appear to have been occasions when the insurer should have been more responsive, I do not consider that it unreasonably delayed progression of the claim. The home was repaired within ten months of claim lodgement, which included a Christmas/New Year period. Noting the extent of damage and contamination, that period was reasonable.
However, I accept that the unnecessary loss of irreplaceable items with high sentimental value has been upsetting and distressing for both complainants. Further, the payment of the contents sum insured may address the loss of the physical value of those items, but not its impact on the complainants.
I also accept that ongoing concerns about the adequacy of remediation of the kitchen and kitchenette caused the complainants considerable concerns about the safety of themselves and their children. While I am satisfied the insurer adequately tested the kitchen, it did not do so for the kitchenette. That failure was unreasonable in the circumstances.
It is therefore reasonable that the insurer pays each of the complainants $3,000 in non-financial loss compensation ($6,000 in total).
The insurer has paid well over the TA costs limit, so it would be unfair to require it to pay further TA costs. It is fair the insurer compensates the complainants for stress it caused through not satisfactorily investigating the kitchenette’s remediation status and by disposing of contents items unnecessarily.
AFCA has determined this complaint based on what is fair in all the circumstances, having regard to:
The respective parties have completed a full exchange of the relevant information, and each party has had the opportunity to address any issues raised. I have reviewed and considered all the information the parties have provided.
While the parties have raised several issues in their submissions, I 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:
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.
