Insurance claims are difficult to navigate and you may feel like you are locked in a David and Goliath battle. For individuals and businesses there is a great deal of information and process asymmetry where the insurance company is much more knowledgeable and versed in insurance law.
Not all insurance claims need a lawyer, but you may need further advice if your claim is significant or getting delayed or denied. Our insurance expert outlines three things that your insurance company probably won't tell you when you make a claim. Here are 3 things that insurance companies won't tell you:
1. An Insurer's duty of utmost good faith
When you make a claim, your insurance company has a duty to act towards you with the utmost good faith.
This means that the insurance company must act "consistently with commercial standards of decency and fairness, with due regard to the interests of the insured". The insurance company must not act dishonestly, unfairly, unreasonably or capriciously.
To give some examples:
- it is a breach of the duty of utmost good faith for the insurance company to deny a claim by seeking to make ambiguous words in the policy into an exclusion;
- it is a breach of the duty of utmost good faith for the insurance company to use information provided by the insured in support of a claim for the purpose of the insurer assessing the validity of the policy, if the policy wording does not permit this;
- it is a breach of the duty of utmost good faith for the insurance company to assert that the insured has breached their duty of utmost good faith, if this as not the case; and
- it is a breach of the duty of utmost good faith for the insurance company to fail to point out to the insured that they are entitled to an extra benefit under the policy, that is, a benefit that is in addition to the benefit that the insured has claimed.
In some situations the duty of utmost good faith requires the insurance company to give the insured an opportunity to respond to its concerns, before they make an adverse decision.
Your insurance company also has a duty to act towards you efficiently, honestly and fairly. This duty overlaps to a large extent with the insurance company's duty of utmost good faith, but it is a separate duty.
These two overlapping duties are enlivened in a great many factual situations.
Your insurance company may be acting towards you in a way that is inconsistent with its duty of utmost good faith or its duty to act efficiently, honestly and fairly, but they haven't told you this.
2. An Insurer can't rely on some policy terms
It is not widely known that in a variety of situations an insurance company is prevented from relying on a policy term and denying or reducing a claim, by the Insurance Contracts Act. This is Commonwealth consumer protection legislation which operates in favour of insureds and other claimants.
In summary, an insurance company cannot rely on a policy term where:
- utmost good faith - relying on the policy term would be a failure by the insurer to act with the utmost good faith;
- pre-existing defect or imperfection - the policy term excludes or limits the insurer's liability by reference to a pre-existing defect or imperfection, and the insured was not aware of, and a reasonable person in the circumstances could not be expected to have been aware of, the defect or imperfection;
- pre-existing sickness or disability - the policy term excludes or limits the insurer's liability by reference to a pre-existing sickness or disability, and the insured was not aware of, and a reasonable person in the circumstances could not be expected to have been aware of, the sickness or disability;
- act or omission of the insured or some other person - in some situations, the effect of the policy term is to permit the insurer to refuse to pay the claim by reason of an act of the insured or some other person after the policy was issued.
Your insurance company may be prevented from denying or reducing your claim, but they haven't told you this.
3. Interest on insurance claims
It is not widely known that an insurance company that doesn't pay a valid claim within a reasonable time is liable to pay interest, under the Insurance Contracts Act. The insurance company has to pay interest even if legal proceedings haven't been commenced and even if interest hasn't been claimed.
The current interest rate is 7.16% per annum.
Your insurance company may already be liable to pay a substantial amount of interest on your claim, but you don't know this and your insurance company hasn't told you.
Why you may need a lawyer for your insurance claim.
Getting an insurance lawyer can help you fast track your insurance claim and also ensure a better outcome faster. We understand the parameters of what an insurance company can and can't do and are skilled at holding them to account. If your claim is denied or details are contested, we can assist.
If you are struggling with an insurance claim and need assistance, contact our insurance lawyers today to see how we can help you get a better outcome faster.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
