The insured held a house insurance policy with P. In August 2009, they arranged for the insurance to be changed into the name of a family trust they had formed.
In February 2011, a significant earthquake struck Christchurch, resulting in extensive damage to the house. The insured made a claim to the insurance company for the damage, as trustees of their trust.
Subsequently, they discovered the trust was only covered for the market value of the house and not for its full replacement value. They believed the insurer had a duty to inform the trust that the level of cover under the policy was not sufficient for its needs.
Assessment
It is accepted law in New Zealand, that the duty is on an insured person, to read and understand the terms and conditions of the policy. Therefore, while it is good business practice for an insurer to explain the coverage provided by the policy, to the insured, it is under no legal obligation to do so. It is the responsibility of the insured to make sure the level of cover provided by the policy meets his/her needs. Ignorance of the law does not affect this duty.
This is one of the reasons that insurance is often obtained through insurance brokers, rather than directly from an insurance company. A key role of an insurance broker is to seek and obtain insurance cover that best meets the needs of a customer.
The insured also believed they had notified the insurer that there had been extensions added to the house, however, the insurer did not have any record of them having done so and the insurer did not increase the floor area listed on the policy, or update the sum insured to reflect this.
In situations such as this where there is contradictory evidence, the ISO Scheme’s ability to investigate is limited. Unlike a court of law, the ISO Scheme is unable to resolve conflicts of oral evidence. The ISO Scheme is an informal scheme and, therefore, unable to assess credibility. Because of this limitation, the case manager had to rely on the documentation provided and there was no available documentation which would help to resolve this matter. Unfortunately, on that basis, the case manager could not resolve this issue.
While the case manager did have some concerns that there may have been some failings in the insurer’s customer service, the IFSO has no power to require it to make any payments outside the terms of the policy, on a goodwill basis. The case manager discussed the circumstances of the complaint with the insurer and whether it would be willing to offer some sort of goodwill gesture. In this instance, it declined to do so.
Result: Complaint not held
