Victorian earthquake responsible for third-most AFCA complaints

The Australian Financial Complaints Authority (AFCA) says last year’s Victorian earthquake generated the third-highest number of insurance complaints in the past 12 months.

The dispute resolution body says complaints relating to Covid and the NSW and Queensland floods are ahead of the 5.9 magnitude quake that hit the state on September 21.

As of June 22, AFCA has received 373 complaints relating to the quake, compared to just over 400 from the floods and more than 3700 covid-related complaints.

It says 150 quake complaints have been concluded, resulting in $297,000 in payments to policyholders who successfully challenged their claim.

The Insurance Council of Australia (ICA) reports that 16,387 claims have been made relating to the earthquake, with an estimated loss cost just short of $120 million.

Homeowners have felt the brunt of the earthquake, with 13,807 (84.2%) of all claims relating to damage to domestic properties, according to ICA data.

AFCA says the majority of complaints are related to insurers denying coverage due to policy exclusion, at a figure close to 60%, delays in claims handling account for 20% of claim, outright denial of claims approaches 12%, and disputes of claim amount account for 7%.

“Disputes can arise over insurance claims for earthquake damage if the parties disagree about the cause of the damage,” AFCA Lead Insurance Ombudsman Emma Curtis said.

“The insurer might consider that it’s not earthquake damage but is due to other factors – for example, the damage is pre-existing damage, or the property is too far from the epicentre of the earthquake for it to be the cause.

“If the cause of damage is not clear, we’d expect the insurer to have an engineer’s report supporting their decision.”

Proving damage relating to the earthquake can be difficult. A recent AFCA ruling features a homeowner who won’t be covered for cracking to her home after a dispute ruling determined that an insured event did not cause the damage.

She held a home insurance policy with Suncorp and lodged a claim on September 22, saying the earthquake caused cracking to her veranda, driveway, and porch.

The insurer denied the homeowner’s claim, saying that the damage was pre-existing to the earthquake and that the policy did not cover it.

The homeowner confirmed the cracking but said that the earthquake exacerbated it.

A consultant appointed by the insurer observed deterioration in the affected areas but said it was most likely due to movements in the foundation over an extended period of time, not the tremor, but they recommended a specialist review to confirm.

Suncorp employed engineering consultants, referred to as M, to investigate the property on October 5, and they provided a report on October 27.

The report concluded that the cracking was not caused by the earthquake, saying that given the distance between the property and the earthquake’s epicentre it was improbable that it could have caused damage.

M noted other construction issues as potential causes for the wear over time, saying the cracking on the pergola resulted from a lack of control points generally required for concrete pavements.

M’s report also said the location of cracking near the driveway indicated that the paving was completed with different materials, one of which was observably weaker than the other that didn’t have any cracking.

M also said that some areas had cracks beside crack control joints in the driveway, which indicated that the joints were not installed correctly.

The complainant disagreed with M’s analysis, saying they were only on the property for five minutes to conduct their report. She did not provide any information to rebutt the evidence provided by the insurer’s experts.

AFCA admitted that the experts’ qualifications were important factors in the determination, given noted flaws in their procedure, and pointed out that the complainant failed to offer a contrary expert opinion.

It said that the cracking did appear to get more prominent after the earthquake, but the complainant had already acknowledged the issue and that they should have made sure it was fixed before the event.

AFCA concluded that the insurer was entitled to deny the claim on the probabilities of evidence provided by the insurer’s expert.

Click here for the full ruling.