Levelling the playing field for insurance policyholders

Has your house burned down or been the subject of a theft? Did a pipe burst and cause damage from the flow of water? Did your business suffer a loss as a result of an unexpected event?

After the shock has passed, you may thanking your lucky stars that you have insurance for this situation, only to find an unexpected battle ahead with your insurance company in processing your claim, fairly quantifying the loss, and properly rectifying the damage. While it can be daunting, you should feel confident in dealing with your insurance company to obtain the benefit of the policy.

Policy holders have traditionally been less well advised and represented when it comes to insurance disputes and it is important to understand your rights as a policy holder and call out conduct of insurers which does not comply with the very laws designed to protect insureds/policy holders. In this article, we set out some common issues which arise in complaints and cases involving insurers.

Duty of good faith

Insurance companies owe a duty of utmost good faith to their customers, which is an implied term in all general insurance contracts. The duty of utmost good faith requires honest and full disclosure, and exercise of powers in accordance with commercial standards of decency and fairness. A breach of the duty of good faith is a civil penalty and ASIC can intervene if an insurer has failed to comply with the duty of utmost good faith pursuant to Section 14A of the Insurance Contracts Act 1984.

However, policy holders also owe the duty of utmost good faith to the insurance company. Thus, an insureds misrepresentation or failure to make full disclosure to the insurer before entering into the contract of insurance may result in the reduced liability of the insurance company or even the cancellation of the contract.

General Insurance Code of Practice

Many insurance companies are signatories to the General Insurance Code of Practice (Code), which sets out high standards of conduct for the insurance company in dealing with its customers. For example:

  • before an insurer starts an investigation of a claim, it is required to:
    • tell the insureds verbally and in writing about its claims investigations process;
    • who is their primary contact for the investigation and their details;
    • the role and responsibility of the investigator or any employee that has been appointed to investigate the claim;
    • when to expect to hear from the investigator or employee;
    • that within 10 Business Days after the insurer has received all relevant information and completed all of its enquiries that it will tell the insureds if it is going to pay the claim and the insureds rights and responsibilities under the Policy during the investigation and about the insurers complaints process;
  • in the event that the insurance company is not in a position to provide its indemnity decision in relation to the Claim, it is required to in accordance with Clause 68 of the Code provide:
    • an estimate of the likely timeframe and process the insurer will take to make a decision about the Claim on the basis that it is fast-tracked;
    • what further information the insurer requires to make its decision;
    • the applicable terms and limits under the Policy considered to be relevant to the Claim; and
    • confirmation that it will will provide regular updates as to the progress of the Claim including an update as to the current status of the Claims.

Pursuant to the Code of Conduct, insurers are also required to provide details of all experts, loss assessors or investigators that have been appointed by them in respect of the Claim including their full names and qualifications and what their role is in accordance with Clause 72 of the Code as well as provide copies of all reports to policy holders.

Breaches of the Code are investigated by the Code Governance Committee of the Insurance Council of Australia, which can impose sanctions on the insurance company for non-compliance.

What can you do if an insurance company is not progressing your claim or has declined your claim?

Usually the first step is to seek further information in writing from the insurance company concerning whether indemnity under the policy is admitted and if so, on what terms and if not, the reasons and exclusions being relied upon.

The decisions made by insurance companies are not always correct and you may be able to challenge an insurers decision by escalating a complaint via the insurers internal complaints process, issuing a complaint to AFCA or issuing Court proceedings.

In the event that an insurer has breached its duty of utmost good faith due to the way in which it has handled your claim, you may be able to seek damages from the insurance company including possibly damages for consequential losses. This will depend on the facts of your case and the detriment which you have suffered as a policy holder as a result of the insurers breach of its duty of utmost good faith.

 

If you think that your insurance company is failing to adhere to its duty of good faith and/or the Code in handling your insurance claim or if you have a complaint concerning the decision made by an insurer, do not hesitate to contact Elit Lawyers to seek legal advice.

Our sole focus is on helping policy holders navigate these complex claims and level the playing field between policy holders and large insurance companies.

Should you require insurance advice, please contact Danielle Snell and Robert McGirr of Elit Lawyers on 03 9098 8646.

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