Insights for consumers
It is important to be mindful of the scope and wording of your insurance policy. If you find yourself in circumstances where you think you might need to eventually make an insurance claim, check the wording of your insurance policy and notify your insurer before incurring any costs.
What happened?
When Cyclone Gabrielle hit on 13 and 14 February 2023, Willow’s business had 19 heavy machines located at skid sites in the upper North Island.
The machinery had originally been taken to the skid sites using a transporter around 2021, and the machinery was supposed to stay at the skid sites, some situated in forests, for a further six months to two years. However, the cyclone caused damage to the roads, bridges, and forest, and the skid sites were deemed unproductive, so Willow’s business were tasked with relocating the machines from the original skid sites to new skid sites.
The cyclone did not cause any physical damage to the machines. If the cyclone hadn’t occurred, the forestry company that Willow’s business had contracted with would have paid for the machines to be transferred to the next skid sites when it was time to move.
Willow’s business made a claim for $85,500 (plus GST) under its business policy for the costs of internal labour, the machine running costs, and accommodation and vehicle travel costs associated with moving the machinery. The insurer declined Willow’s business’s claim.
Willow complained to FSCL on behalf of her business.
What did the policy say, and what were the parties’ views?
Willow and the insurer disagreed on the interpretation of the relevant section of the policy, which said:
“Recovery costs – no damage
- If a machine becomes immobilised or inaccessible and unable to be used without physical damage or destruction and as a result of a sudden and unexpected event occurring during the period of insurance, the insurer shall indemnify the insured against the reasonable and necessary costs incurred with the insurer’s prior written consent of recovering or attempting to recover the machine”.
The insurer’s view was that the policy did not respond in Willow’s business’s circumstances. The machinery was able to be “walked out” (“walk[ing]” machinery refers to driving the machinery out of the skid site using its own power, rather than having it picked up on a transporter) to a pick up point. A transporter would then pick up the machinery to take it the rest of the way to the new skid site. This meant that the machines were not “immobilised”, and they were able to be used without damage or destruction.
Willow’s view was that the machines were stuck in the forest and were unable to be used under normal conditions. Willow noted that some machines were walked for 16km, taking several days, and moving the machines had benefitted the insurer because it mitigated the potential loss or damage to the machines had they remained at the original skid sites.
What was FSCL’s view?
We agreed with the insurer’s interpretation of the policy, and we did not think that the policy provided cover for Willow’s business’s claim. We agreed that the machinery could not be categorised as “immobilised” or “inaccessible and unable to be used without physical damage or destruction” in circumstances where the machinery was able to be walked out of the original skid sites without causing any physical damage to the machinery.
We also noted that Willow’s business was required to get written permission from the insurer under the terms of the policy before incurring the costs, and they had not done this.
How did FSCL suggest that the complaint should be resolved?
We explained our views to Willow. Willow was disappointed but decided to discontinue her complaint. We closed our file.
