Insurer must pay claimant for storm repairs to home

A homeowner whose property was damaged by a storm will be compensated for her losses after a dispute ruling determination overruled her insurer’s decision to decline the claim.

The complainant lodged a claim on March 2, last year, after the home had been damaged on the same day.

An IAG-appointed builder, referred to as BB, inspected the property on March 8 but only provided a completed report nearly three months later.

The claimant said she phoned the insurer weekly for updates on the report’s progress but was only provided “conflicting advice” on what she should do.

The complainant said some IAG employees told her to arrange repairs because the insurer was “very backlogged” with claims from catastrophic flooding in NSW and Queensland in late February. She elected to conduct some repairs, saying leaking water was “making the damage worse”.

IAG denied that its employees told the policyholder to conduct repairs and said it had grounds to deny the claim because she did not have the authority to commence the works without the insurer’s approval.

The Australian Financial Complaints Authority (AFCA) said the home insurance policy stipulated that if the property was damaged, the insured “must do everything reasonable to prevent further loss or damage”.

“In the circumstances, it would have been unreasonable to require the complainant to leave her home in a state of disrepair for so long,” AFCA said.

The insurer alleged that the homeowner did not allow it to inspect the damage because it had been repaired. It also said that she failed her duty of disclosure by not informing it that the property was being used as a beauty salon, although it elected not to argue this point further.

AFCA said the insurer’s allegations were “not true,” noting that IAG had inspected the property before the repairs occurred and had no further inspections planned. It also highlighted that the complainant had offered photographs and videos of the damage to the insurer, which it said were “not required”.

The ruling said the insurer was not entitled to decline the claim and required it to pay the “reasonable cost of repairs”.

The complainant provided a list of quotes and invoices, which showed the total cost of repairs at $123,416. IAG disagreed, saying that BB’s report indicated “minor” damage to the home, with repairs costs amounting to $4368, which it reduced to $3368 after applying the $1000 claims excess.

AFCA noted that BB’s report did not include repairs to the lower level of the house, which had been inundated with at least an inch of water over the flooring for six days after the storm.

“It is implausible that the lower level could be undamaged after being covered by an inch of water for almost a week,” it said.

“The insurer has not explained why its settlement offer does not include the cost of repairing this area.”

AFCA speculated that the insurer chose not to include the area because it had been used for the beauty salon. It said the insurer was not entitled to ignore this damage without a valid reason.

The ruling also highlighted that BB had not included any repairs to the flooring and quoted costs at a “much lower” rate than the claimant’s contractors.

“I believe BB’s quote includes only a small fraction of the damage caused by the storm. Therefore, it would not be reasonable to settle the claim based on BB’s quote,” AFCA said.

It said that the policyholder’s quote had been “more reliable” and agreed that it was fair to settle the claim at $122,416 plus interest from two weeks after BB’s report was filed.

Click here for the ruling.