Homeowner wins $45,000 accommodation top-up after leak

A NSW resident who is still waiting for repairs to be carried out after a flexi hose burst in her upstairs bathroom almost two years ago has won a large payout and compensation for delays in a claim dispute over her temporary accommodation benefit.

IAG accepted the June 2020 claim for the resultant damage and temporary accommodation costs, including liability for mould remediation at the property, which was insured for $450,000.

The homeowner went to the Australian Financial Complaints Authority (AFCA) after her accommodation benefit was exhausted, with the property not yet habitable or repaired.

She said claim delays impacted the health of her family as her young child was affected by mould until temporary accommodation was provided over a year after the event, and complained IAG lacked process and professionalism.

Temporary accommodation should be covered until the property was repaired, and compensation awarded for the poor claims experience, she said.

AFCA said that due to “mismanagement of the claim”, repairs had still not commenced and a scope of works was only presented in late January this year. It ruled IAG must cover ongoing temporary accommodation until the insured property was repaired and habitable, and also increase its offer of compensation to $3000, from $2000, and maintain an offer of counselling.

“The insurer failed to manage the claim appropriately,” AFCA said. “It has a duty to progress the claim and complete repairs in a timely manner. By failing to do so, the complainant has exhausted the temporary accommodation benefit under the policy and should not be penalised for the failings of the insurer.”

IAG should pay the lesser of 12 months accommodation, or $45,000 – equating to 10% of the sum insured, it said.

“I do not consider it fair the insurer expects the complainant to fund ongoing temporary accommodation for an accepted claim. The claim was lodged June 1 2020 and an initial scope of works has only been presented as of January 22 2022,” the ombudsman said.

“The insurer was aware of the cost of the temporary accommodation and should have been reasonably aware the benefit would be exhausted prior to the property being repaired. Knowing this, the insurer made no reasonable effort to provide alternative temporary accommodation options suitable for the complainant.”

IAG – which had already contributed more than $83,000 towards her temporary accommodation, including $38,000 ex-gratia – said the property had to be stripped to expose any mould issues, and COVID restrictions impacted its ability to confirm the scope of works. The repair delays were primarily due to the mould assessment and remediation, which took months, it said.

“There is no apparent reason why this is the case,” AFCA said. “The insurer could not progress the claim without the remediation, however, did not appear to take steps to expediate the process.

“The complainant has been adversely affected beyond what would be expected in an insurance claim … and should not be penalised for the failings of the insurer.”

In mid June, IAG asked if she could be placed in Newcastle, around 16 kilometres from her home. She advised she had located a more suitable AirBnB which would support a dog. A quote was accepted by IAG. No policy limits or obligations were discussed then, or in September when IAG reset the accommodation benefit because poor remediation work had led to further damage.

In November, IAG reminded the homeowner of the policy limit and offered a cheaper serviced apartment as a way to “extend the benefit,” but with no information of the location, facilities or whether it was appropriate.

She later lodged complaints with IAG and AFCA.

“The insurer did not present the complainant with any details and did not push the issue,” AFCA said, adding IAG had made only a “limited attempt” to sort things, and expecting her to relocate 15-20 kilometres away was not reasonable.

“The insurer made no effort to resolve the issue of temporary accommodation beyond the suggestion of potential alternative accommodation made in early November.”

AFCA said IAG’s team of specialists appeared “to have been engaged in a piecemeal fashion and in some instances were not aware as to why they had been engaged,” and the homeowner was “constantly chasing” extensions to her temporary accommodation which was “also approved in a piecemeal fashion”.

“There appears to be mention of the complainant calling constantly to obtain updates, however, it appears this is in response to the insurer’s lack of action or knowledge of how the claim was progressing,” the ruling said.

There appeared to have been significant periods where no progress on the claim was made, AFCA said, ruling that upon agreeance of the scope of works, IAG had ten business days to provide a schedule of repairs, must communicate pro-actively about progress and notify the complainant immediately of any delays via a dedicated claim contact.

See the full ruling here.