WA Claim Accepted in writing but now won't pay - have changed their mind

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Julie Mag

Active Member
14 June 2016
9
0
31
I made an insurance claim for a television through my insurance broker. The claim was accepted in writing to the broker by the insurer and then by the broker to me.


I received an email on 13 November 2018 from my broker stating, quote “Please be advised that insurer has issued settlement for your claim as per the following; Replacement TV: $2,695.00, Service Fee: $124.00 Less Excess: $100.00 Total Settlement: $2,719.00. The settlement has been issued into your nominated account. Please allow 2-4 business days for the funds to show in your account.”


I had not received the funds so I rang my broker on Thursday 22 November and they said they would follow up. I spoke with them again on Friday 23 and was told they were waiting for an update from the Claims department of the insurer.


After some back and forth, I was told by my broker that the insurer had decided that they would no longer accept the claim as they believed that the settlement was not for an equivalent product. I disputed this as I had already had the email in writing stating that the claim was settled so it was unacceptable for them to renege.


My broker then referred me to the internal disputes resolution team of the insurer. On 7 December, I spoke with the Customer Relations Specialist of the Internal Customer Relations section of the insurer. They offered me an amount of around $1,000 in settlement and I declined. I reiterated that I had already received a confirmation of settlement in writing for the amount of $2,719.00 and it was my belief that this would be a legally binding settlement. They then told me they would review the case and get back to me although it may take until 20 December before I would hear back from her.

I have written (on Monday 10 December) to that same person (the Customer Relations Specialist of the Internal Customer Relations section of the insurer) and stated it is now causing me financial hardship and I hadn't heard back so I telephoned her today. Voicemail was left although I don't hold out much hope for a response any time soon.

I have contacted Australian Financial Complaints Authority (they are closed today) and will await their response.

I am truly disgusted by the insurer and will be finding a forum that I can Name and Shame them. Won't be insuring with them ever again.

Can anyone offer any suggestions on what ELSE I can do?
 

Scruff

Well-Known Member
25 July 2018
902
133
2,389
NSW
How much is the TV actually worth? ie; How much did you pay for it?
 

Julie Mag

Active Member
14 June 2016
9
0
31
I don't know how much we paid for the original TV. We had water damage from storms back in 2010 and lots of our papers in our filing cabinets had to be thrown out due to mold from the water damage. We couldn't remember where we purchased it in order to locate a copy of the original receipt either. The television was an old 2009 model. The service guy who assessed the damaged television said the screen needed replacing but due to the age of the television no part could be sourced to replace the screen. So the television would need to be replaced. The insurer had a copy of that report.
 

Julie Mag

Active Member
14 June 2016
9
0
31
the insurer asked for a quote and one was provided. the settlement was then accepted as outlined in my original communication. It has not been paid though.
 

Zerojay

Well-Known Member
12 March 2017
95
12
319
Hi Julie,

If you have been financially prejudiced by the initial wrong settlement advice then you can demand that the insurance company compensate you accordingly. So if for example, based on the settlement advice you purchased a new tv for $2000, before you were advised the settlement was amended to $1000, then legally you are entitled to $2000. If however you have not yet spent any money, then your entitlement is the correct replacement cost of the tv.

In other words, the insurance company can reduce your settlement to $1000 if an error has been made, provided they advise you before you have been financially prejudiced by their mistake.

They should provide an apology and full details but otherwise it would be unfair for you to profit from an honest mistake. Insurers will generally wear small mistakes but not $1700.

I do not give legal advice, just my opinion based on working for an insurer for over 20 years.
 
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Julie Mag

Active Member
14 June 2016
9
0
31
I hear what you are saying, we did replace the television already and it was in excess of their offer. infact their offer did not include the costs of the report or anything else. Their offer was not even close to the cost of the replacement television. I appreciate your opinion although from a legal standpoint i have been led to believe they must honour their settlement offer.
 

Zerojay

Well-Known Member
12 March 2017
95
12
319
I have only a layman’s knowledge of contract law so I welcome anyone correcting me.

My understanding goes like this:
When you take out insurance you are entering into a contract with the insurance company. The terms and conditions of that contract are set out in the policy wording(PDS) and the schedule. Included in the PDS are the clauses setting out how a claim will be settled - for a contents policy it will typically state that if the claim is accepted, and the item is not economically repairable, the insurer will replace, or pay the cost to replace with a new equivalent item. If an exact replacement is not available then the settlement is based on the nearest equivalent.

Say supposing you obtained a replacement quote for $1000 and the insurance company paid you $1000 in settlement. Subsequently when you went to buy the tv, you discovered the retailer had made a mistake with the quote and the correct replacement cost is $2700. You have a legal right to go back to the insurer for the difference because you have not been settled in accordance with the insurance contract. By the same reasoning, if the insurer has been misled by the wrong quote they are legally entitled to change the settlement once they become aware of the mistake because they will be meeting their contractual obligation by paying $1000. They can do this even if they have already sent advice that they will pay $2700 as it was based on erroneous information.

If however you were unaware the quote you sent to the insurer was wrong, and solely on the basis of the first advice spent money you otherwise would not have spent, then you may be entitled to some compensation. But it’s tricky because the insurance company may say they were only acting on incorrect information provided by you.

Now in the situation where there is disagreement about the replacement value, and following negotiation between you and the insurance company, let’s say a compromise figure is agreed upon. Then that settlement amount is binding on the insurance company and they cannot reneg unless there has been fraudulent activity.
 

DMLegal

Well-Known Member
28 May 2018
187
33
514
I have extensive experience with such matters from previous employment at an insurer as in-house counsel. Firstly, the email stating you have been settled $x is not binding on the insurer - their acceptance is founded on the premise the television was of an equivalent to the damaged television, since the quote you obtained appears not to be an equivalent to the damaged television the insurer is not bound.

In relation to 'financial hardship' I am struggling to comprehend how the absence of a television is causing you hardship, can you elaborate?

Lastly, the insurer is only required to either replace the television with a similar model or may, at their discretion, issue a cash settlement for the amount which it would cost THEM to replace the television (insurers typically get a hefty discount from retailers). Thus, if you obtain a cash settlement of $1500 and the television costs $2200 in store, providing the insurer could purchase the television for $1500 they have satisfied their obligation under the Policy.