Insurance claims handling in domestic building. Why the system is failing homeowners

Insurance claims handling…home & strata, plumbing & builders warranty insurance.

After spending a chunk of my career working in the commercial insurance industry (dealing with complex PI insurance and directors’ & officers’ claims) as a private practice lawyer I am surprised to be engaged in so many domestic claims. I am happy to help but many of these shouldn’t need a specialist lawyer to resolve.

My insurance colleagues would expect these are less complex and less likely to be disputed.

Yes, less complex, but ‘NO’ not less disputed.

Why?

Two reasons I see:

1. No broker being involved leads to less informed advocacy and influence for the insured.

Without the broker minor issues become entrenched disputes.

2. Insurer staff lack legal knowledge and rely on preferred repairer opinions.

Often the starting point for a denial starts with an insurer’s preferred repairer providing an opinion on the property condition or cost of repair.

Insurers have deep pockets and when needed have access to experience lawyers but many of these positions are formed by claims officers with little to no legal training.

Maintenance and defect exclusions are classic examples of denials.

There really is limited oversight for a lot of this insurance too.

If the claim relates to home or strata the avenue of filing at AFCA does exist but that is a lottery ticket for insureds as insurers are advantaged by AFCA’s approach to evidence.

It’s not a proper court of evidence but it is now dealing with substantial sized disputes and because it only really looks at certain documentary evidence this advantages the insurer by design.

For plumbing insurance and domestic builders warranty insurance there is a 28 day timeframe to file with the tribunal (at least in Victoria) but tribunal is not fit for purpose for these types of disputes.

VCAT does not have jurisdiction to hear commonwealth claims or defences. The very statute that deals with insurance matters is the Insurance Contracts Act 1984 (Cth)!

If a party raises a section 54 defence the matter is that referred from the tribunal to court! What a waste of time and cost.

We need an investigation by the ASIC into evidentiary considerations at AFCA including:

• the systemic use by domestic insurers of non independent parties to provide expert opinions; and

• how the AFCA balances the rights of insureds who are naturally at a disadvantage at the AFCA without legal representation and given AFCA’s approach to evidence (expert evidence and non-documentary evidence); and

• cost consequences for insurers in denying claims and legal costs being incurred. At present, there is no negative impact on insurers.

With regard to builders warranty and plumbing insurance we need to have a forum that properly works. The Building and Plumbing Commission should take charge of submissions to government to ensure a proper forum for jurisdictional issues for DBI and plumbing and complaints about insurance claim handling.

This article is a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Tagged as:

• building disputes