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Determination
Case number | 12-00-1044338 |
Financial firm | NTI Limited |
Case number: 12-00-1044338 15 August 2024
The complainant (a company) holds a commercial motor insurance policy with the financial firm (the insurer). The complainant’s truck broke down after coolant leaked out of a damaged part of the engine (the sub-radiator), causing the engine to overheat.
The complainant lodged a claim saying the breakdown was caused by the truck hitting an emu about two weeks earlier. The insurer denied the claim because it does not accept that the breakdown was caused by an impact. The insurer says the sub-radiator was leaking coolant for months or years before the breakdown.
The complainant maintains the truck was damaged by a collision, and the insurer should accept the claim. The complainant also says the insurer took too long to progress the claim, and left the truck in a poor condition after inspecting it.
No. The truck was not damaged by an impact. The truck broke down because wear and tear caused a mechanical failure. The policy excludes cover for this kind of damage.
No. The damaged sub-radiator is with the insurer’s engineer. The insurer must return this to the complainant if the complainant requests it. The insurer did not misplace or damage any other parts of the truck. The insurer did not cause an unreasonable delay.
The complainant’s truck was damaged. However, the available information indicates the damage was caused by factors the policy excludes from cover. Therefore, it is fair for the insurer to deny the claim.
This determination is in favour of the insurer.
The insurer must return the sub-radiator if the complainant requests it. The insurer is not required to take any other action in relation to this complaint.
No. The truck was not damaged by an impact. The truck broke down because wear and tear caused a mechanical failure. The policy excludes cover for this kind of damage.
The cover provided by the policy is set out in the product disclosure statement. Relevant policy terms are quoted in section 3.2 of this determination.
The policy covers ‘Accidental loss or damage’. The policy says ‘accident’ or ‘accidental’ ‘means a sudden, unintended, unforeseen, unlooked-for event or mishap, which is not expected nor designed’.
The policy excludes cover for damage caused by certain factors, including:
On 13 September 2023, the complainant says the truck hit an emu at 90-95km/h. The driver pulled over and briefly inspected the truck, but found ‘no visible damage’.
On 25 September 2023, the complainant says the truck broke down. The complainant had the truck towed to a mechanic it had previously dealt with. According to the complainant, the mechanic said the engine ‘lost compression… due to the initial animal strike damaging the radiator’.
On 26 September 2023, the complainant lodged a claim with the insurer.
The insurer’s internal assessor inspected the truck on or about 19 October 2023. The assessor said:
The insurer appointed a forensic mechanical engineer, who inspected the truck on 8 November 2023. In a report dated 15 November 2023, the engineer said:
In a supplementary report dated 8 April 2024, the engineer said he did not see the low coolant warning sensor during the inspection, and now questions whether it was installed when the engine failed.
In his original report, the engineer said the location of the build-up indicated the coolant had leaked from a rubber gasket. In his supplementary report, after further examination of the sub-radiator, he said the coolant actually leaked from a split in a plastic tank. The split would have started as a small crack at a defect in the plastic, then gradually grown due to the stress imposed by coolant expanding and contracting.
The complainant provided photos which appeared to show something red splattered on the underside of the truck. This could have been caused by the truck hitting an animal. However, the photos do not show any dents or cracks. The engineer said the photos were of parts near the back of the truck; the sub-radiator is at the front of the truck. The engineer said the photos did not show any evidence of a foreign object striking the sub-radiator, so they did not change his opinion.
The complainant says the impact with the emu could have caused a ‘hairline crack’ in the radiator, which the coolant later burst through. The complainant says the cooling system is pressurised, and could have emptied in seconds. The engineer says this is not correct: a small amount of coolant could be expelled under pressure, but this would reduce the pressure of the cooling system, and any remaining coolant would drain out with the force of gravity.
The complainant says it changed the coolant on 5 July 2023, and the visible and audible low coolant warnings were operational at that time. It says the truck’s driver reported no low coolant warnings before it broke down on 25 September 2023. It says the warning system did not activate because the loss of coolant was too sudden. The engineer says this is not correct: even if all coolant was expelled in seconds (which it was not), the warning system would have been activated, and would have given the driver time to stop the engine before it was damaged.
The complainant says the impact on 13 September 2023 caused the breakdown on 25 September 2023. However, the complainant has not explained why:
Having considered the information provided by both parties, I am satisfied the insurer’s experts are correct about the cause of the breakdown.
The truck broke down because wear and tear caused a mechanical failure. The policy excludes cover for wear and tear and ‘mechanical events’. The insurer is entitled to apply these exclusions to deny the claim.
No. The damaged sub-radiator is with the insurer’s engineer. The insurer must return this to the complainant if the complainant requests it. The insurer did not misplace or damage any other parts of the truck. The insurer did not cause an unreasonable delay.
The complainant says the insurer took an unacceptable amount of time to progress the claim.
On 26 September 2023, the complainant lodged the claim.
On or about 19 October 2023, the insurer’s internal assessor inspected the truck. On 19 October 2023 the assessor emailed his findings to the insurer.
On 20 October 2023, after a discussion with the complainant, the insurer said it would deny the claim and treat it as withdrawn.
On 23 October 2023, the complainant asked for the claim to be reopened and reassessed.
On 8 November 2023, the engineer inspected the truck. On 15 November 2023, the engineer completed his report.
On 23 November 2023, the insurer sent the complainant a copy of the engineer’s report, and maintained its decision to deny the claim.
The General Insurance Code of Practice (to which the insurer subscribes) says insurers will decide whether to accept a claim within four months of receiving it (unless there are special circumstances). The insurer denied the claim within two months of receiving it.
The Code of Practice says insurers will decide whether to accept a claim within 10 business days of receiving all relevant information and completing all inquiries. The insurer had enough information to deny the claim on 15 November 2023, when its engineer completed his report. It then denied the claim within six business days.
The insurer denied the claim within a reasonable amount of time, and within the time specified in the Code of Practice.
The complainant says the insurer left the truck in a poor condition. The insurer says the truck has been with the complainant’s mechanic since the breakdown, and it should contact the mechanic about any concerns it has about the truck’s condition.
The complainant says the sub-radiator and coolant sensor are missing. The insurer says the sub-radiator is with the engineer, and can easily be returned to the mechanic. The engineer says he did not see the coolant sensor during the inspection, and he doubts it was installed before the breakdown.
The complainant says various parts have been removed from the truck and not reinstated. The engineer says these parts need to be removed to repair the truck, so it would be ‘non-sensical’ to reinstate them before repairs. The complainant has not responded to this.
The engineer says he left the parts he removed (other than the sub-radiator) in the truck’s bed, and left the bolts he removed in a bag on the cab floor. He provided photographs showing this.
The available information does not show the insurer’s experts damaged the truck or misplaced any parts.
The complainant’s truck was damaged. However, the available information indicates the damage was caused by factors the policy excludes from cover. Therefore, it is fair for the insurer to deny the claim.
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 of the information the parties have provided.
While the parties have raised a number of issues in their submissions, I have restricted this determination to the issues that are relevant to the outcome.
POLICY PRODUCT 1 COMMERCIAL MOTOR (pages 20 – 33) | ||||
Definitions Specific To All Parts of Policy Product 1
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SECTION 1 OWN DAMAGE What You Are Insured For in Section 1 Own Damage Subject to the terms of this Policy Product 1, the General Exclusions and Conditions that apply to all Policy Products and payment of any applicable Excess, We will pay for Accidental loss or damage to or Theft of:
… occurring during the Period of Insurance. … Specific Exclusions That Apply to Section 1 of this Policy Product 1 We will not pay and there is no Cover for:
Loss, damage, or resultant mechanical damage to Your Insured Property as the result of:
However, other than resultant mechanical damage, We will cover loss or damage to Your Insured Property resulting directly from an Accident or fire caused by such failure as stated above.
Loss, damage, or resultant mechanical damage to Your Insured Property as the result of:
However, other than resultant mechanical damage, We will cover loss or damage to Your Insured Property resulting directly from an Accident or fire caused by such failure as stated above. … |
