IFSO Case Study

A couple arranged for contents insurance through their bank.

Two years later, a bank employee telephoned the insurer on behalf of the woman, inquiring about specifying a lady’s watch. During this telephone discussion, the employee advised the insurer that the watch was worth $2900. As the policy limit was $3000 for a single item of jewellery or watch, the insurer advised that the watch did not need to be specified on the policy.

A few months later, the bank employee again telephoned the insurer, and inquired about specifying a diamond ring. The insurer advised the bank employee to tell the client that, in order to specify the ring, she would need to provide a valuation. The bank employee told the insurer that he had referred her to a jewellery valuer.

The next year, the bank employee telephoned the insurer regarding the ring. A valuation was faxed to the insurer. The watch was raised in this telephone discussion; however, as it still had an estimated value under
the policy sub-limit of $3000, the insurer advised that it did not need to be specified. The insurer said that it could be a good idea to get a valuation for the watch, given its value was close to the $3000 policy limit.

Subsequently, the couple's house was burgled and items of contents were stolen, including the watch.

The woman made a claim under the policy.

A jeweller valued the watch, noting that the particular model was unavailable and that the closest equivalent had a replacement value of $6375.

The insurer accepted the claim, but advised that the policy limit of $3000 would apply to the watch, because it was not a specified item on the policy.

IFSO investigated and found the watch was never specified on the policy schedule. In determining whether the insurer or its agent, the bank, should have listed the watch as a specified item on the policy, the case manager reviewed the recordings of the relevant telephone discussions in which the watch was mentioned.

From the recordings, the case manager believed the woman had informed the bank employee that the watch was either worth $2900, or that she bought it for $2900. She said she told him she bought it in Singapore and paid SGD $2900 for it. The insurer said it was not necessary to specify items that were valued below $3000. However, it also said that it would be good to get a valuation if she felt it might be worth more than that.

The woman stated that the bank employee did not advise her to obtain a valuation for the watch.

Unlike a court of law, the IFSO Scheme cannot assess oral credibility, but must consider the documentary evidence available. The case manager was unable to make a decision about whether the bank employee advised the woman to get a valuation for the watch; there was no documentary evidence nor recorded conversations about this issue. However, it was clear that the insurer advised the bank employee to tell her to get a valuation for the watch.

Having gone through the process of valuing and specifying the ring, the case manager believed the woman  was aware, or ought reasonably to have been aware, that the watch needed to be valued to determine its sum insured, before it could be specified. The insurer was only informed that she bought the watch for $2900.

The case manager believed the insurer correctly advised that, if this indeed was the value of the watch, it did not need to be specified, because it was below the policy limit. Moreover, the insurer suggested she get a valuation for the watch, given it was believed to be valued so close to the policy limit.

She could have obtained a valuation for the watch, just as she had done with the ring, so that it could be specified for a sum insured of more than $3000. However, she did not specify the watch and the insurer was entitled to rely on the policy terms to limit its liability to the policy limit of $3000 for the watch. The complaint was not upheld.

December 2020

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