This fact sheet is for information only. It is recommended that you get legal advice about your situation. This fact sheet is an overview of some common reasons why an insurer may refuse your claim. CASE STUDY Nicola and Matt have been living in their home for the last 15 years. Nicola and Matt were sitting at home during heavy rain one weekend. Nicola noticed water coming through the
front door. Matt went outside and noticed that a drain was overflowing. The water kept coming in even though Nicola had used every towel in the house to try and soak it up. Then it got worse! The house started to flood. The carpet was ruined, furniture ruined and worse now the house was on a slant. Nicola and Matt put in a claim with their insurer, BIG INSURANCE COMPANY. Big Insurance Company has rejected the claim saying that flood is excluded. If the insurer has refused
your claim this refusal must be in writing. If the insurer telephones you and tells you your claim has been refused, ask them to put it in writing. If English is your second language you should consider using an interpreter to assist with completing the claim form or a complaint even if you speak some English. Remember that the insurance policy is a contract and the refusal of the claim is a legal dispute. NOTE: Both the Australian Financial Complaints
Authority (AFCA) and the State consumer tribunals cannot accept claims over a certain monetary amount. If your claim exceeds the appropriate amount you will need to go to Court or reduce your claim to the maximum allowed at AFCA or Tribunal. Note that there are no legal costs at AFCA. Get legal advice before doing this. If your complaint to your insurer’s Internal Dispute Resolution Department has been rejected, it is recommended that you then proceed with raising a dispute
with AFCA because: If you want to give up get legal advice before you do so. You can call AFCA on 1800 931
678 and visit their website www.afca.org.au to lodge a claim. IMPORTANT: YOUR TIME LIMIT TO LODGE A COMPLAINT IN AFCA WILL EXPIRE ON THE EARLIEST OF;
AFCA generally will not grant the right to lodge a disptue outside this time frame without the agreement of the insurer. When you lodge your complaint you will be asked to fill in a form called a “notice of referral”. For more information on the complaints process call AFCA on 1800 931 678 or visit their website www.afca.org.au. THE MAIN TYPES OF REFUSALSThere are four main reasons for refusal:
NON-DISCLOSUREYou are under a duty to disclose relevant information when you take out an insurance policy, or when you renew it. If you did not provide accurate or comprehensive information at the relevant time, the insurer may be able to reject your claim. Some common examples of non-disclosure are:
There are two ways that you are required to disclose information:
You are not required to disclose:
The Insurance Contracts Act 1984 (Cth) limits the circumstances in which your claim can be denied as a result of disclosure:
The responsibility for proving that a non-disclosure allows the insurer to reduce or deny your claim, is with the insurer. So, if your claim has been refused on the basis of non-disclosure then you need to:
Insurance contracts often contain conditions and exclusion clauses. Examples of conditions include:
The insurer may refuse your claim if you have failed to comply with a condition. However, Section 54 of the Insurance Contracts Act states that the insurer cannot refuse to pay a claim because of some act or omission by you unless the insurer’s interests have been prejudiced by that act. For example, if you have failed to have keyed locks on all windows and a thief enters your premises by smashing a window, or knocking down the front door, you may be able to argue that your failure to install or maintain the window locks has not prejudiced the insurer because it did not contribute to the loss or damage suffered as a result of the break in. Most insurance policies also contain exclusions. An exclusion is a situation or event that is NOT covered by the policy. Some examples of events that may be excluded are:
Some of the more common exclusions are discussed below. To rely on an exclusion clause the insurer has to prove on the balance of probabilities that the exclusion clause applies. In some cases the insurer may also have an obligation to bring the exclusion clearly to your attention, although this does not need to be done in person. It would usually be sufficient to include this information in the documentation sent to you when you took out the policy. FLOODMost insurers do not cover damage caused by flood, or severely restrict the circumstances in which they will pay. The law spcifically defines flood, and distinguishes it from damage caused by rainwater or stormwater, that is, rain that accumulates on the ground because of the severity of the storm. The exact definition of “flood” is in the Insurance Contracts Regulations 1985 (29D): Definition of Flood: The covering of normally dry land by water that has escaped or been released from the normal confines of any of the following:
If your claim is rejected because the insurer says it was caused by flood then you need to get advice because:
For more information please see our Flood Insurance Guide. WHAT IF I HAD A DEFECT IN MY HOME I WAS UNAWARE OF?Insurers sometime deny claims because they say that the damage was caused by a pre-existing defect in the property (for example, that the roof let water in because it was poorly constructed). Section 46 of the Insurance Contracts Act provides you with an argument against this. Section 46 states that if you were unaware of the defect when you entered the insurance contract (and a reasonable person in the circumstances would not have been aware of it) then the insurer cannot refuse the claim. Unfortunately, there has been a case decision that narrows the interpretation of this section. Get legal advice. WEAR AND TEAR/DAMAGE OVER TIMEThe insurance policy will often exclude “wear and tear” and damage caused by the failure to maintain the home. For example, a storm may blow tiles off your roof. The insurer may refuse to pay the claim if your house was old and the tiles needed replacement anyway because of their age. Insurance policies are not a substitute for failing to maintain your home. If the insurer rejects a claim because of wear and tear then you need to try to get the following evidence:
Fraud is a serious allegation and the onus of proof is on the insurer to prove the allegation. Read our Factsheet: What can I do if I am investigated for fraud? To establish fraud the insurer needs to prove that you intended to deceive the insurer or acted with reckless indifference as to whether or not the insurer was deceived. If fraud is established by the insurer then it can reject your insurance claim and void your policy. This means you no longer have insurance cover. In serious cases, the matter may be referred to the police to investigate and you may be charged with an offence. The insurer cannot rely on fraud if the fraud was minor and it would be unfair for the insurer to reject the claim. Insurers are always on the lookout for fraud. To avoid being investigated:
If you are being investigated for fraud, get legal advice immediately. Under section 7.3 of the General Insurance Code of Practice, the insurers have agreed that they will only take into account “relevant information” when deciding on your claim. In the context of fraud this can be interpreted very widely. You should complain to the insurer if you think the information requested is excessive or irrelevant and/or the investigation is taking too long. Try to be assertive but not rude or aggressive as this will only put the insurer and/or investigator offside. If you are being investigated by the insurer, some tips include:
In AFCA, a Referee decides all disputes where fraud has been alleged. The Referee may request additional information from you or the insurer and, where appropriate, interview you or other willing witnesses in person.
Insurance companies sometimes cancel insurance policies in the middle of the period of insurance cover. This may be done in response to additional information provided by you that increases the insurer’s risk to an unacceptable level. Another very common reason is that you have failed to pay the premium for the policy. This is particularly likely if you have opted to pay your premium in instalments via direct debit and your direct debit has failed. If your insurer tells you that your policy has been cancelled, you should get advice about whether they had sufficient reason to cancel the policy and whether they took appropriate steps to inform you of the cancellation in accordance with their legal obligations. If you wish to dispute their decision to cancel the policy, or argue that they have not properly notified you of the cancellation, you can make a complaint to AFCA. NEED SOME MORE HELP?See Fact sheet: Getting help for a list of additional resources. Last updated: October 2018 Why would a home insurance claim be rejected?There are four main reasons for refusal: Non-disclosure – you have not disclosed information when you applied for or renewed the policy. Exclusion clauses – the policy does not cover the loss. Fraud – the insurer believes you have acted fraudulently in some way.
In what circumstances would a property insurance claim be rejected Brainly?Your insurance claim may be rejected if: You don't file your claim promptly. The cause of property damage falls under an exclusion condition in your policy. You haven't been paying your insurance premiums.
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