General Insurance - Domestic Insurance - Motor Vehicle- Comprehensive - Service - Service quality

Determination Case number: 244914 General Insurance - Domestic Insurance - Motor Vehicle- Comprehensive - Service - Service quality 2 May 2012 Background 1. The female Applicant s (DT s) vehicle was insured with the Financial Services Provider (FSP) for an agreed value $27,900. 2. It was damaged in a collision with a third party vehicle on 8 December 2010. 3. A claim was lodged with the FSP who accepted liability and proceeded to authorise repairs. 4. There were significant delays in completing the repairs, which the Applicants claim were poorly carried out. 5. As a result of such delays and poor repairs, the Applicants believe they are entitled to: Have the remaining defects on their vehicle repaired by their preferred repairer ( MSR ); Compensation for losses they have unnecessarily incurred (or will incur) as well as for the experiences they have been put through during the course of the claim. 6. The FSP has refused the Applicants demands. Summary of Applicants position 7. Whilst the Applicants have raised a number of issues, their principal complaints are that: The FSP s handling of the claim was poor. The repairs to the insured vehicle were poor. 8. This led DT (the vehicle s primary user) to incur/encounter unnecessary costs, delays, frustrations, stress, and poor repairs. Case No: 244914 Determination Page 1 of 11

Summary of FSP s position 9. The insured vehicle has been repaired in accordance with the manufacturer s specifications and industry standards. 10. It guarantees the repair for the life of the vehicle, so the Applicants should have confidence that it will inspect the repair and arrange any necessary rectification work. 11. The claim was handled in accordance with the terms of the policy in a fair, reasonable, and timely manner. 12. The delay encountered was unavoidable. It has no control over the availability of parts or incorrect parts being delivered. 13. The policy does not provide for compensation, increased settlement or require it to write off a vehicle because of inconveniences arising during the claims process. In any case, the Applicants have not proven their loss. 14. The policy does not provide for depreciation. 15. It has reimbursed (or will reimburse) the Applicants the following sums as a gesture of goodwill: $765.50, being premium paid for the renewal period. $181.50, being three month s worth of registration. 16. The Applicants have not shown that the defects on the insured vehicle were caused during the repair process or by its authorised repairer ( SGSR ). 17. MSR s quote includes claims for items unconnected with the collision or with the original repairs carried out to the vehicle. 18. The FSP relies on the following policy provisions: The Protection we provide When your car has been damaged, we will decide to repair it, pay the cost of repairing it, declare it a write-off and pay the agreed value, or replace it. If your car is damaged Discount Hire Car Benefit an extra premium is payable (see Safe Driver exception below) This benefit provides you with a hire car at a discounted daily hire rate for up to ten days while accident damage to your car is being repaired under the terms of this policy. You are responsible for paying the discounted daily hire rate for the period of the hire car is provided to you. You can add this benefit to this policy by paying an extra premium when you commence or renew your policy. Case No: 244914 Determination Page 2 of 11

We will not pay for We will not pay for: The repair loss because you cannot use your car, for example, of wages or commission. We choose the repairer and arrange the repair for you. To do this, we ordinarily obtain two independent, competitive quotations from repairers we recommend. If you want, you can choose a repairer to provide one of the quotes. Where replacement parts are required for the repair of your car and: your car is within its manufacturer s standard new car warranty period New genuine parts will be used except for the replacement of windscreen and window glass for which Australian manufactured, Australian Design Rule compliant parts will be used. The [FSP] Lifetime Repair Guarantee The quality of workmanship and the materials authorised by [the FSP] in the repair of your car will be guaranteed for its life. The parts used in the repair of your car will be of the same type as those explained on these pages. If you are concerned about the quality of the repair of your car, you must call us on and you must make your car available to us. You must not authorise rectification work without our written authority. If your car cannot be repaired If in our opinion, the damage to your car is so great that it would not be safe or economical to repair, we will declare your car a write-off and pay the agreed value of replace it. Issues 19. Whether the FSP s carriage of the claim was poor and if so, are the Applicants entitled to compensation. 20. Whether the insured vehicle has been reinstated to its pre-loss condition and if not, are the Applicants entitled to have it repaired by a repairer of their choice. Case No: 244914 Determination Page 3 of 11

Reasons for decision Preliminaries 21. As informed to the parties, due to the multiplicity and complexity of the issues in dispute, it has been directly referred to an Ombudsman for Determination in accordance with the Operational Guidelines to the Financial Ombudsman Service s (FOS) Terms of Reference. 22. I am satisfied that the material has been exchanged and the parties have had the opportunity to respond to the issues raised. Total loss vs. entitlement to repair 23. The Applicants submission indicates that they were seeking a total loss payout of the claim as well as an entitlement to have the remaining defects on the insured vehicle repaired by their preferred repairer (MSR). As the Service cannot provide for both forms of remedies at the same time (if it were to find in their favour), the Service s Case Manager contacted DT to seek clarification on the matter. 24. DT has clarified that the insured vehicle is repairable and that she would like to have it repaired by her preferred repairer MSR. She further confirmed that no further works have been carried to the vehicle pending the outcome of this dispute so the vehicle is still in state it was when the FSP delivered it back to her. 25. In light of DT s clarification, I will proceed with the matter on the basis the Applicants seek to have the insured vehicle repaired by MSR. Terms of Reference, law and other policy provisions considered 26. I consider the FOS Terms of Reference relevant to this dispute are: 8.2 Dispute resolution criteria Subject to paragraph 8.1, when deciding a Dispute and whether a remedy should be provided in accordance with paragraph 9, FOS will do what in its opinion is fair in all the circumstances, having regard to each of the following: a) legal principles; b) applicable industry codes or guidance as to practice; c) good industry practice; and d) previous relevant decisions of FOS or a Predecessor Scheme (although FOS will not be bound by these). 9.2 Compensation for direct financial loss or damage Subject to paragraph 9.7, FOS may decide that the Financial Services Provider compensate the Applicant for direct financial loss or damage. 9.3 Other compensation Case No: 244914 Determination Page 4 of 11

a) Subject to paragraph 9.3 c) and paragraph 9.7, FOS may decide that the Financial Services Provider compensate the Applicant for consequential financial loss or damage up to a maximum amount of $3,000 per claim made in the Dispute. b) Subject to paragraph 9.3 c) and paragraph 9.7, FOS may decide that the Financial Services Provider compensate the Applicant for non-financial loss but only where: (i) an unusual degree or extent of physical inconvenience, time taken to resolve the situation or interference with the Applicant s expectation of enjoyment or peace of mind has occurred; or The maximum amount of compensation for non-financial loss will be $3,000 per claim made in the Dispute. c) Notwithstanding paragraphs 9.3 a) and b), FOS will not provide compensation for: (i) consequential financial loss; or (ii) non-financial loss, in a Dispute arising as a result of a claim on a General Insurance Policy that expressly excludes such liability. 27. I have considered the following policy provisions in addition to those referred to by the FSP: [The FSP]: Peace of mind Peace of mind comprehensive car insurance from [the FSP] [The FSP] comprehensive car insurance provides you with the peace of mind that comes from knowing that not only are you properly covered but also that you will have our great experience working for you in resolving what needs to be done should your car be damaged in an accident The benefits we provide Hassle free claims Our claims service will take the away the hassle and stress of having an accident. From quotes to repairs to keeping you informed of your car s progress 28. I have also considered sections 13 and 14 of the Insurance Contracts Act, 1984 (the Act) in the course of considering this dispute. Section 13 of the Act provides that a contract of insurance is a contract based on the utmost good faith, and there is implied in each contract, a provision requiring each party to act towards the other party, in respect of any matter arising under or in relation to it, with the utmost good faith. Section 14 of the Act provides that if reliance by a party to a contract of insurance on a provision of the contract would be to fail to act with the Case No: 244914 Determination Page 5 of 11

Claims service utmost good faith, the party may not rely on the provision. In deciding this issue the court shall have regard to any notification of the provision that was given to the insured, whether a notification is required by section 37 or otherwise. 29. The Applicants have provided detailed accounts of their experiences with the service provided by the FSP during the course of the claim. I have carefully reviewed them and find it more appropriate to refer most of them to the Code Compliance Manager for further consideration. 30. Having said that, I found the following experiences relevant to the issues I am called upon to consider: Misleading information provided by the FSP. The Applicants say that they were provided with a number of estimated completion dates for the repair when it was plain that no repairs were ever carried out to the insured vehicle at all. Other than a suggestion that the Applicants should only regard the dates given as estimates, the FSP has not disputed this fact. The FSP attempted to pass its obligation to procure a vehicle part to them. It is the FSP s case that the repairs were significantly delayed because of a lack of a wiring harness which it had to order from overseas. The Applicants say that the FSP had asked them to chase the vehicle s manufacturer for the part. The material indicates that the FSP did make this suggestion. The problems securing a part from overseas are said to have been caused by the tsunami. Yet it did not occur until nearly three months after the claim was lodged. 31. It appears plain from the evidence that the repair was principally delayed by the lack of a particular part. The FSP s response to the matter is simply that it could not do anything about it. I am of the view the FSP could have and in fact, had an obligation to do a lot more than it had done. I should add that its response is grossly inadequate. It does not respond to many of the Applicants claims or list relevant dates. 32. The essence of the FSP s promise was to provide the Applicants with a hassle free claims experience. It also has an obligation to act with utmost good faith which case law has indicated, encompasses an obligation to resolve claims reasonably promptly. 33. The fact a part was unavailable does not absolve the FSP of its promise to provide the Applicants with a hassle free claims experience. Nor does it absolve the FSP from having to resolve the claim reasonably promptly. Case No: 244914 Determination Page 6 of 11

34. It is pertinent to point out that the FSP chose to award the repair job to its authorised repairer (SGSR) in preference over MSR. In doing so, it had the obligation to ensure that SGSR was ready and able to complete the relevant repairs within a reasonable period. The fact SGSR did not have or was unable to procure a relevant part is not an excuse to begin with, nor should it be a concern to the Applicants. 35. The FSP could have attempted to check with MSR, other authorised repairers or for that matter, other repairers throughout Australia to see if they had or were able to procure the relevant part once it became apparent that SGSR was unable to complete the repair without significant delay. It could very well have been possible that MSR or another repairer may have had the missing part available all along (or the ability to procure one immediately) and as such, could have completed the repair fairly promptly. 36. The FSP could also have attempted to check with other representatives and service centres of the vehicle s manufacturer in Australia or other vehicle spare part shops to see if they had the missing part in stock. 37. The FSP s material does not indicate it attempted any of the above or for that matter, made any reasonable attempt to expedite the repair; which was its primary obligation under the policy. Apart from mere follow ups with SGSR, it essentially did nothing to attempt to expedite the repair. It also did not assist the situation that it continually gave the Applicants false hopes of completion dates that never materialised and it appears that overwhelmingly it was also left to the Applicants to chase up the FSP or SGSR. 38. On the material before me, I am not satisfied that the FSP had handled the Applicants claim in a manner consistent with its policy obligations, good insurance practice, and an obligation to act with utmost good faith, as required by section 13 of the Act. 39. It is unacceptable that the Applicants were deprived of their vehicle for 9 months as a result of passive claims handling. I would have been inclined to accept the FSP s explanation for the delay if it had demonstrated that it made some active attempts to expedite the repair apart from mere follow ups with SGSR. 40. It was also inappropriate for the FSP to have suggested that the Applicants chase up the procurement of the missing part. As previously indicated, it had the obligation to provide a hassle free claims service and to also ensure that its nominated repairer was able to complete repairs within a reasonable period. 41. I am concerned that the FSP had continually provided the Applicants with estimated completion dates when it also claims to have no idea or control over when the missing part would arrive from overseas. To provide an estimated completion date when it was not reasonably certain that it will materialise is plainly misleading as it gives customers false hopes. Case No: 244914 Determination Page 7 of 11

42. Given the Applicants experiences, it is reasonable to appreciate their strong beliefs of being misled as well as their loss of confidence in the FSP and SGSR. 43. In the circumstances, I am satisfied that the Applicants have been put to unreasonable and inordinate inconvenience, delay, frustration, and costs as a result of a passive handling of their claim. Repair quality 44. Turning to the quality of repairs, apart from a bold assertion, I note that the FSP has not provided any evidence to substantiate its claim that the vehicle has been repaired in accordance with the manufacturer s specifications and industry standards. No evidence has been led to suggest that the vehicle has had a post-repair inspection to begin with, let alone certified as repaired in accordance with the manufacturer s specifications and industry standards. 45. In any case, I have reviewed the photographs supplied by the Applicants and there are clearly a number of visibly obvious defects. Although the FSP has sought to dispute these defects as being unconnected to the repairs conducted by SGSR, it is plain a number of the vehicle s panels and components do not fit properly or in an acceptable manner (as evidenced by inconsistent gaps). In my view, this is indicative and consistent with either incomplete or poor repairs. 46. The evidence further indicates that the Applicants repairer MSR had carried out an inspection of the vehicle and prepared two quotes. The quotes appear to indicate that some of the defects on the insured vehicle were due to incomplete or poor repairs (see MSR s 16 August 2011 quote); while others were unconnected to the 8 December 2010 collision and presumably, the repairs carried out by SGSR (see MSR s 7 October 2011 quote). 47. Insofar as defects connected to incomplete or poor repairs, MSR has particularly reported as follows: The vehicle s wheel base is misaligned. The vehicle s battery is not holding its charge. It is possible that further damage or defects may become apparent upon dismantling. 48. I am satisfied that the FSP has had a reasonable opportunity to inspect the vehicle if it was concerned with the veracity of the Applicants claims or MSR s report. Although it was offered an opportunity to inspect the vehicle at MSR s premises, the FSP chose instead to insist that the Applicants should bring the vehicle to its service centre. It is difficult to regard the FSP s stand on the matter as reasonable in light of the circumstances that have arisen; particularly in view of a lack of an attempt on its part to resolve the claim expeditiously at the initial stage. This is particularly the cause having regard to the extraordinary delay which, by this time had occurred. Case No: 244914 Determination Page 8 of 11

49. Considering these matters on the balance of probabilities, I am satisfied that the insured vehicle had not been properly reinstated to its pre-loss condition. 50. Given the manner in which it had handled the claim, I am also satisfied that the FSP has now lost the right to insist that it is entitled to inspect and repair the damage/defects to the insured vehicle, let alone insist that the Applicants should produce the vehicle at its service centre. In this respect, the Service has issued many determinations to the effect that an insurer who has failed to discharge its policy obligation within reasonable time would lose a right to insist on control over the future conduct of a claim. Costs Incurred by the Applicant as a result of the delay 51. I have given consideration to the claim by DT for compensation for all the days she was without the use of her car. 52. Ultimately, I have decided that I shall not make an award under this heading. The Applicant has not supplied any details of actual loss, though I acknowledge her inconvenience which I have dealt with separately. Determination 53. In light of the above matters, I consider it fair in all the circumstances to determine this dispute as follows: Future conduct of the claim a. The Applicants are entitled to have the repairs identified in MSR s16 August 2011 quote carried out by MSR at the cost of the FSP. The FSP would also be responsible for the cost of rectifying any further defects that may be uncovered during the rectification process. As previously indicated, considering the delays that have occurred as well as the FSP s election not to inspect the vehicle at MSR s premises (despite being given an opportunity to do so), I am satisfied that the FSP has now lost the right to question the veracity of MSR s 16 August 2011 quote. b. The FSP is not required to bear the cost of repairing the matters identified in MSR s 7 October 2011 quote. They appear to be unrelated to the 8 December 2010 collision or the repairs previously carried out by SGSR. c. The FSP is to provide the Applicants with a hire car during the course of the rectification works. Whilst I am mindful that the Applicants have no cover for such cost, I consider the FSP liable for this cost because of its failure to fulfil its primary obligation (ie. to reinstate the insured vehicle to its pre-loss condition). The Applicants would not be put to such costs if not for such failure. Case No: 244914 Determination Page 9 of 11

Storage costs d. Upon completion of rectification works, the Applicants are entitled to have the vehicle independently inspected by a suitable expert for the purpose of establishing that the vehicle has been reinstated to its preloss condition insofar as it concerns only the damage arising from the 8 December 2010 collision. The cost of such an inspection is to be borne by the FSP. e. The relevant expert is to also confirm if it is acceptable for the insured vehicle to only have one tyre replaced. If the expert confirms that it is unacceptable, the FSP is to bear the cost of replacing the other undamaged tyre. If the expert confirms that it is acceptable to only replace one tyre that is the end of the matter. As I understand, tyres are ordinarily replaced in pairs and this is because it is generally unsafe to have a vehicle with inconsistent tyre wear on the front or the back, as the case may be. f. As the repairs proposed in MSR s 16 August 2011 quote is to primarily rectify incomplete or defective repairs carried out by the FSP s authorised repairer, the FSP remains responsible for the quality of the rectification works for the lifetime of the vehicle in accordance with the policy. g. The Applicants are entitled to reimbursement for any storage costs they may have incurred subject to the production of a receipt evidencing such costs. I consider that the storage costs are a direct result of the FSP s gross delays and the reasonable need to take the vehicle to another repairer for an opinion. h. The Applicants are entitled to interest at the statutory rate on the amount stipulated in (g) above from the date such cost was incurred until the date they have been reimbursed. Delay and inconvenience i. I am satisfied that the Applicants are entitled to the maximum amount $3,000 under clause 9.3(b)(i) of the Terms of Reference. I am satisfied that the FSP s passive conduct of the claim had: Caused the Applicants an unusual degree of physical inconvenience; Subjected them to inordinate delays; and Interfered with their enjoyment of the insured vehicle. In this connection, it is also pertinent that the FSP had, as a matter of policy obligation, expressly promised to provide the Applicants with a hassle and stress free claims experience which was not the case in reality. I note that the Applicants have put the FSP squarely on notice that they were seeking compensation for the matters of delay, rudeness, non Case No: 244914 Determination Page 10 of 11

Other compensation cooperation, misleading information and inconvenience and I consider the FSP s response to this matter quite inadequate. j. The Applicants are not entitled to any compensation for depreciation. Leaving aside the policy exclusion in relation to depreciation, the insured vehicle would continue to depreciate whether or not it has been repaired, and whether or not it was in the Applicants possession. k. The Applicants are not entitled to compensation for registration and CTP costs other than that which the FSP had already reimbursed. They would have had to incur such costs as a consequence of having a vehicle. l. However, subject to the provision of proof, the Applicants would be entitled to reimbursement for any additional costs they may have had to incur to re-register the vehicle if it had been de-registered as a result of being damaged and/or unrepaired. This would include reimbursement of any storage cost that they have had to incur during this time. m. The Applicants are entitled to interest at the statutory rate on the amount stipulated in (l) above (if any) from the date they have been incurred until the Applicants have been reimbursed in full. 54. I determine accordingly. Case No: 244914 Determination Page 11 of 11