A homeowner took out a home and contents insurance policy with Hollards on 17 March 2021.

On 19 March 2021, the insured’s home was flooded by a river.

The insured lodged a claim with Hollards.

Why was the claim denied by the insurer?

Hollards denied the claim on the basis that the policy contained an exclusion clause that operated to enable Hollards to avoid liability for cover for flooding damage that occurred within 72 hours of the policy commencing.

Once the claim was lodged, Hollards provided emergency accommodation and assisted with the removal of damaged items from the property.

The insurer advised the insured that it was considering whether it would provide indemnity for property damage under the home and contents insurance policy.

The insured submitted that he spoke with a Hollards’ representative on 12 April 2021 and was advised that the 72 hour exclusion clause only applied to newly purchased houses.

Hollards eventually relied on the exclusion clause to deny indemnity for property damage.

The insured lodged a complaint with Australian Financial Complaints Authority (AFCA) arguing that Hollards did not inform him of the exclusion clause and had been misled into believing that the exclusion clause did not apply in his circumstances.

AFCA upheld Hollards’ decision to deny the claim. AFCA’s decision was based on the fact that the 72-hour exclusion clause was specifically referred to in the Product Disclosure Statement (PDS), which the insured had confirmed he had read and understood.

On this basis AFCA found that Hollards “was entitled to rely on the policy terms.”

What about exceptions to the 72-hour exclusion?

AFCA noted that the 72-hour exclusion did not apply in circumstances where an insured transferred an equal policy from another insurer with no interruptions on coverage of the policy.

In this instance, the insured’s property was uninsured for a week from purchase, from 10 March 2021 to 17 March 2021 and therefore could not rely on any exceptions to the exclusion clause.

Did the insurer engage in unfair or unreasonable conduct while the claim was under review?

AFCA noted that the insurer did not at any point inform the complainant that it would accept the claim despite the exclusion. With respect to the discussion with an employee of the insurer the exclusion didn’t apply to newly purchased properties, AFCA considered that this was an error and was corrected by the insurer within days and therefore did not constitute unfair conduct by the insurer.

This is an important reminder for those affected by floods to consider the terms of their policies. If you have any queries regarding an insurer’s decision on property damage, contact us today.