A family trust owned a house.
The trustee of the trust was a trustee company. The directors were a couple and the woman’s mother.
The trustee company arranged insurance for the house through its financial adviser.
The couple lived at the house. They arranged cover for their contents at the house through the broker. They then separated. In July 2017, the man reported a burglary at the property to the police and the broker and said the house had been vandalised and a number of items taken.
The woman’s mother also contacted the broker to advise of the damage. The next day, the broker logged a claim for the damage and the theft.
The broker advised the couple of the claims to their separate email addresses.
The insurer opened two claims for the damage: one for the mother and one for the couple.
In August 2017, the broker emailed the man, copying in his partner, stating that she had asked the insurer to appoint a loss adjuster “to your claim”.
In or about August 2017, the insurer appointed a loss adjuster to assess the claims. About two weeks later, the broker emailed insurer stating that, as she had been unable to contact the couple so she had left a message for the woman’s mother to call her.
She then emailed the broker advising that the couple were separated. At the end of August 2017, the insurer closed the mother’s claim for the damage, because it was a duplicate of the man’s claim.
On September 5, 2017, the broker advised the insurer that the man had asked about cash settlement of the house claim.
The broker suggested that the couple both sign the discharge form as they were separated. On September 6, the insurer confirmed it would cash settle the house claim, but it would require the discharge to be signed by the couple.
On September 7, the loss adjuster emailed a discharge form to the man to cash settle the house claim.
The loss adjuster explained that it also needed to be signed by the woman and witnessed.
On September 11, at 5.10pm, the man emailed the signed discharge form to the insurer to settle the house claim for $15,893.79 less the excess of $750, being $15,143.79.
On September 13, the insurer approved the payment of the settlement amount and paid it to the trust through the man’s bank account, which was nominated as the appropriate account on the signed discharge form.
On September 13, the broker emailed the couple at their separate email addresses, confirming the settlement amount had been paid. The woman’s lawyer emailed the broker regarding the signed discharge form. In relation to the contents claim, the lawyer advised the items were relationship property and she did not agree to cash settle the contents claim.
On September 15, at 4.26pm, the woman’s mother emailed the broker stating that her daughter had not signed the discharge form and
that it was “a clear case of fraud”. She asked the broker and the insurer to recover the settlement amount and pay it directly to the builders to repair the house.
On September 18, at 4.11pm, the broker emailed the insurer, advising that the mother had said the discharge form had been fraudulently signed. The next day the broker called the insurer to advise the same. On September 25, 2017, the insurer emailed the broker, stating that even if the discharge form had been fraudulently signed, the policy allowed a policy in the name of a trust to be treated as a joint policy and that each of the insureds was deemed to act with the express authority of each other and one insured could make or settle a claim.
On September 16, the woman’s mother made a formal complaint to the insurer on behalf of the trust, regarding the cash settlement of the house claim.
On October 3, the broker confirmed to the insurer there would be no claim from the woman.
On October 10, the insurer responded to the complaint, advising that it believed it was entitled to rely on the signed discharge to meet the house claim under the house policy.
On October 13, the broker emailed the man and the insurer separately, confirming the schedule of loss for the contents claim. On October 14, 2017, the insurer emailed the broker regarding the contents claim and asking her to advise the couple that the contents claim would be cash settled.
She asked the broker to confirm with the man the account the settlement should be paid into.
On October 16, the broker emailed the insurer to confirm the man’s bank account details for the settlement of the contents claim.
The insurer emailed the broker, confirming that the cash settlement for the contents claim had been paid into the man’s account.
On October 17, the broker emailed the man, copying in his estranged partner, advising the insured had paid the $6,845.85 cash settlement of the contents claim into “your account”.
The woman’s mother complained to the insurer about it cash settling the house and the contents claim on the instructions of the man, directly to his account.
The case manager’s assessment
The case manager believed that, in addition to its legal responsibilities to the trustee under the house policy and to the woman under the contents policy, under section 28 of the Consumer Guarantees Act, the insurer had a duty to carry out its services with reasonable care and skill.
The house claim
The policy condition provided that, if the insured is in joint names or includes the name of a trust, then the policy is treated as a joint policy.
This means that each person is “deemed to act with the express authority of each other” and that each person has the right to “make or settle a claim under the policy”.
The trustee of the trust, which was a trustee company, was the insured under the house policy. I
It was the case manager's view that, as the trustee was a single legal entity, the policy condition allowing the insurer to treat trustees of a trust as joint insureds, did not apply.
The trustee company acted through its directors. While the information provided to the IFSO scheme clearly indicated that the insurer was aware that the couple were separated, they (together with her mother) were both still directors of the trustee company. The signed discharge was undertaken by "... We, the [X] Family Trust", and was signed by the man and purportedly by the woman.
While the woman’s mother believed that her daughter’s signature was signed fraudulently, it was the case manager's view that, as directors of the trustee company, the couple were legally able to enter into a binding agreement on behalf of the trustee company.
The woman and her mother said the discharge form was signed fraudulently by her estranged husband on her behalf.
Section 18 of the Companies Act provides that a company cannot assert one of its directors does not have the "authority to exercise a power which a director of a company carrying on business of the kind carried on by the company customarily has authority to exercise", even if the director "... acts fraudulently or forges a document that appears to have been signed on behalf of the company, unless the person dealing with the company or with a person who has acquired property, rights, or interests from the company has actual knowledge of the fraud or forgery".
In the case manager's view, this meant that the trustee company could not assert that the man or woman did not have the authority, as directors of the trustee company, to agree to the settlement of the house claim and that, as the insurer was unaware the woman’s signature was allegedly fraudulent or forged, the trustee company was bound by the signed discharge, even if her signature was, in fact, forged.
The case manager believed the signed discharge was a contract between the trustee company and the insurer.
As the signed discharge included all the information required by the insurer to cash settle the house claim, including the bank account details for the payment, the case manager believed that the insurer had carried out its services with reasonable care and skill.
The contents claim
On the basis of the joint insured’s provision, legally, the insurer was entitled to treat any communications from the man as an action “with the express authority” of the woman as the joint insured. Also, under the joint insureds provision, the insurer could treat him as being able to “make or settle a claim”.
On this basis, the case manager believed the insurer was legally entitled to communicate only with the man regarding the contents claim and settle the contents claim under the policy directly with him. The woman’s lawyer advised the broker by email that she did not agree to a cash settlement of the contents claim. From the information available to the IFSO Scheme, it appeared the lawyer’s email was not provided to the insurer prior to the contents claim being settled.
The insurer asked the broker to advise the cash settlement of the contents claim to the couple before the settlement was paid to the man.
For the purposes of submitting the contents claim and communications about the contents claim (and the house claim), the broker acted as the insured’s representative. The broker was not an agent of the insurer. On the basis that the insurer was unaware of the woman’s instruction that the contents claim was not to be cash settled, as this email was sent to the broker (her agent) and the insurer had asked the broker to advise her of the settlement two days before the cash settlement was made, the case manager believed that the insurer had met its obligation to use reasonable care and skill in carrying out its services.
On this basis, the case manager believed the insurer was legally entitled to cash settle both claims directly with the man.
The complaint was not upheld.