We receive many enquiries from both individuals and businesses concerned with the process should their claim be rejected by their Insurer.
Australians have recently lived through bushfires, floods, and a worldwide pandemic; as such, insurance acts as a protection mechanism allowing consumers to recover from bad luck by relieving or preventing a financial burden. Given these issues a claim rejected from your Insurer can cause severe financial and emotional distress.
This article will provide general information on the law relating to this subject matter. If you are concerned that your Insurer has rejected a claim to you or your business, you can contact us.
Why Insurance firms deny claims
The main reason why an Insurer denies a claim is due to the Insurer claiming that the Insured did not meet, or does not comply with, the conditions outlined in its policy. Insurance firms rightfully deny thousands of claims every year however plenty of circ*mstances exist where an Insurer has denied a claim. This is due to Insurance policies held in Australia are being subject to both Australian contract law and the Insurance Contracts Act 1984 (Cth).
Section 54 of the Insurance Contracts Act 1984 (Cth) provides a broad scope of remedies an Insured is entitled to when their Insurer refuses to pay a claim due the Insured’s act or omission after the contract was entered into. Our firm has comprehensive knowledge of how section 54 is applied to Insurance claims which technically do not comply with an outlined condition or are listed as exclusions from a policy. What is essential to demonstrate is the protection the Insurer is obliged to give to the Insured throughout the period of insurance cover, irrespective of the condition that it seeks to rely on when denying the claim.
Lodging an Internal Dispute Resolution (IDR) complaint
Insurance firms are required to have an IDR system that meets the requirements made by the Australian Securities & Investments Commission (ASIC). It is important for an Insured to initially begin any complaint here. These systems are generally located on the Insurance firm’s website. These processes provide an outlet for an Insured to provide substantiating evidence as to why the Insured is entitled to the claim, notwithstanding their alleged noncompliance with their policy. These processes are designed to be user-friendly and simple. SLF Lawyers can provide general advice as to what to include in your IDR complaint or can further lodge the complaint on your behalf. Under ASIC Rules, Insurance firms are required to provide a decision to a complaint within thirty days of receiving it.
Appealing a rejected decision with the Australian Financial Complaints Authority (AFCA)
Upon receiving an IDR decision that maintains an Insurer’s entitlement to deny a claim, the Insured is entitled to challenge the decision with AFCA. AFCA will determine the complaint with respect to the relevant legal principles, terms of the Insurance policy and industry practice. Lodging a complaint with AFCA is conducted through its website. If agreement is not reached at the conciliation an AFCA representative will provide a written recommendation that is binding on all parties. Should either party not accept the written recommendation they are at liberty to litigate, in which it is best to have legal representation.
If you require legal assistance or advice in relation to the rejection of an insurance claim, please contact SLF Lawyers on (07) 3839 8011.
Article written by Michael Spalding of our Brisbane office.
