Turning the Tide Part 6 what if the claim is rejected? Internal review by the insurance company If a claim is rejected, insurance companies are required to provide consumers with access to both an internal and external dispute resolution process. You must try to resolve a complaint through the internal review before approaching the external scheme, the Insurance Enquiries and Complaints Limited (IEC). While the structure of the internal dispute resolution process varies from insurance company to insurance company, it usually means that the initial decision is reviewed by someone at a more senior level. This can be useful in two ways: 1. You can find out why your claim was refused - Insurance companies are required by the General Insurance Code of Practice to give reasons for rejecting claims. The letter of complaint and response from the insurance company can be used to find out the reasons why a claim has been refused. These reasons need to be addressed if the complaint is taken to the IEC. 2. More straightforward disputes may be resolved, or incorrect decisions may be overturned, as the matter is considered from a fresh perspective. You may also be given a more detailed explanation of the reasons behind the original decision, and understand that the claim had been rejected correctly. The contact details for each insurance company’s internal dispute scheme can be obtained from the IEC. Complaining to Insurance Enquiries and Complaints If your claim has still been denied after an internal review, the next step is to complain to the IEC. The advantages of this scheme are: The Panel members who determine the claims are familiar with insurance law. The Panel takes into account “good insurance practice” (which may lead to a higher standard of conduct for the insurance company than a court may impose). There is no need for legal representation. Its procedures are generally simpler and quicker than legal action. Complaints may be made in writing without the necessity of a personal appearance. The scheme is free and there is no risk of you being ordered to pay the insurance company’s legal costs if your complaint is unsuccessful. You still have the option of taking the dispute to court if you are dissatisfied with the outcome. The disadvantages of this scheme are: The Panel cannot award damages due to the failure to pay the claim (such as the cost of alternative accommodation, if not allowed under your policy). It may award interest where it considers the insurance company was unreasonable in rejecting your claim. The Panel cannot reimburse any costs to you (eg. for specialist reports). Time limits for complaining Each insurance company designates senior officers to consider claims in an internal review and to make a “final decision” about the complaint. You then have three months from the date of the “final decision” in which to refer the complaint to the Panel. Although the time limit is strict, the Panel has a limited discretion to waive it when there is a valid reason for the delay or to ensure the insurance company has not been prejudiced. If the IEC receives a complaint which has not been through the internal review, they will refer it back to the insurance company for reassessment. The insurance company will then make a “final decision” which can be taken back to the IEC within the three months. Once the IEC has received a complaint it will take 4 to 8 months before it is presented to the Panel for a decision. What matters can the Claims Review Panel hear? The Panel is governed by Terms of Reference, which can be altered from time to time, and which state which cases it can hear. The IEC can provide a copy of the current Terms of Reference upon request. A summary of the types of matters the Panel can hear (as at October 1998) are: Where the claim is for $105,000 (or less), the Panel can make a final decision that is binding on the insurance company about: whether a claim should be paid, or about the calculation of the amount of a claim, or about whether interest should be paid as a result of unreasonably delaying payment. Where the claim involves an amount between $105,000 and $290,000, the Panel can only make a recommendation. The insurance company is under no obligation to accept it but the recommendation is nearly always followed by the insurance company. The Panel can hear complaints by small businesses which have no more than five employees and an annual turnover of not more than $400,000. The Panel cannot hear disputes: involving a claim for an amount over $290,000 where you cannot take legal action because the case is too old (usually 6 years from the date of refusal of the claim) about matters apart from disputes in relation to claims (eg. conduct of assessors) where there is a factual dispute that can only be resolved by choosing between the version of events given by different individuals (although this rarely applies to floods). However, where the case is outside the Terms of Reference, the Panel can still hear it if the insurance company consents. It is worthwhile approaching the insurance company in relation to a claim outside the Terms of Reference to see if they will agree to the Panel hearing it. Procedures of the Claims Review Panel When the IEC receives a complaint, it then writes to the insurance company, asking it to provide a written response. The insurance company can insist its written submission is confidential. However, the IEC will encourage insurance companies to provide consumers with copies of the reports from its hydrologists, if this has not been done. The Panel consists of three people: an independent chairperson; a person with an insurance company background; and a person with a consumer interest background. Generally the Panel decides cases not from interviews with the parties involved, but on the basis of written submissions and a review of the documents. In flood cases, the Panel will usually visit the scene of the storm and inspect the area. The Panel is required to make its decision based on what is fair and reasonable in all the circumstances and with regard to good insurance practice, the terms of the policy and established legal principles. These grounds of relief are broader than those available in a court. The Panel’s decision is binding on the insurance company. However, you have a choice whether to accept the decision. If your claim is still refused by the Panel, you can reject the Panel’s finding and take the insurance company to court. Writing submissions to the Claims Review Panel You should include in your submission: 1. The reasons why your claim should be paid. Your letter should address all reasons the insurance company gave in refusing the claim. 2. Detailed information about what documents you received, when you received them, how the policy is unclear if you are relying on a Standard Cover contract. 3. Any conflicting evidence between eyewitness accounts and the assumptions in a hydrologist’s report. The Panel prefers reliable first hand evidence as opposed to reports provided by hydrologists. It has accepted that the modelling process adopted by hydrologists can only be a simplified reconstruction of events, and may not take into account variations from one street to another. Powers of the Claims Review Panel If the Panel finds in your favour, it can make a decision ordering the insurance company to pay: the amount of the claim interest in accordance with Section 57 of the Insurance Contracts Act (if the Panel considered refusal to pay was unreasonable). The current rate of interest is 13% payable from the date the claim should have been paid. The Panel has no power to order the insurance company to pay: costs or expenses incurred by the consumer (including legal costs) damages. Sample letter Sample letter of complaint to the IEC To the Panel I am the owner of a property damaged in the recent floods at Easytown. My claim has been rejected by my insurance company, Easy Insurance. The insurance policy stated that I am not covered against loss from flood damage. I have been provided with a copy of a hydrologist’s report that Easy Insurance had prepared, and it states that the damage to my property was caused by water overflowing from a nearby creek. I don’t think my claim should have been rejected, as I have a clear memory of that day and was at home when the storm happened. As far as I can remember, what happened that day was: the depth of the water when it first entered my home was quite shallow. I understand that shallow water is more likely to be rainwater than floodwater. After first coming into the house, the water level rose for a while, then peaked and stopped. About an hour later the height of the water started increasing again. I remember this as I was quite surprised to see it rising again. I had thought the worst of the storm was over, and suddenly I had to take steps to protect my furniture. The water first entered my home about 3pm. The records from the Bureau of Meteorology show that this was shortly after the most intense period of rainfall. I have been advised that if the water level increases close to the time when the amount of rain falling is at its greatest, this will suggest the water is more likely to be rainwater. Given the way in which the water entered my house, I consider that it was not floodwater but rainwater and therefore Easy Insurance has incorrectly rejected my claim. I request the Claims Review Panel to decide that the insurance company should have to pay for the damage to my home and its contents. Turning the Tide part 1 : how to use this guide part 2 : what does the policy say? part 3 : where the policy is confusing or you did not get a copy part 4 : what caused the damage? part 5 : getting organised part 6 : what if the claim is rejcted? part 7 : other issues contacts

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The information contained on this page is not legal advice. If you have a legal problem you should talk to a lawyer before making a decision about what to do. The information on this page is written for people resident in, or affected by, the laws of New South Wales, Australia only.