Diego owns a business selling curtains. In late January 2023, Diego’s shop was flooded causing extensive damage. With the help of his broker, Diego made a claim to his insurer, which was partially paid out. However, his insurer declined to pay him $30,000 for the 400 curtain samples that were destroyed in the flood.
Diego complained to FSCL about the insurer’s decision not to cover the curtain samples.
Dispute
The insurer said that Diego had categorised his samples as “all other property”, which he had $20,000 of cover for, not “stock”, which he had $80,000 cover for, in his business books. They said that he had used up the full $20,000 “all other property” cover on other damage, so he couldn’t use it to cover the curtain samples.
Diego said that the samples were used to show customers what they would be buying while in store, so they were stock. Because Diego hadn’t used the full $80,000 cover, he said that he should be paid out for the samples under his stock cover. Diego also said that regardless of how the samples were categorised, he had paid premiums on $100,000 of total cover, so he should get the full benefit of the cover up to $100,000.
Diego provided information from his accountant who explained that the samples had been incorrectly categorised as ‘all other property’ in the business’s books by the previous owner of the business, but that they should have been categorised as stock. Diego also provided FSCL with views from some other insurers who confirmed that they likely would have accepted his claim.
Review
FSCL talked to an independent insurer who said fitting curtain samples into either the ‘all other property’ or ‘stock’ policy definitions was not clear cut. The independent insurer explained that this created a grey area in the policy, and they would have likely accepted Diego’s claim because of it. The independent insurer’s view was similar to the opinions that Diego had received from other insurers.
Taking into account the views of the other insurers and Diego’s accountant, we found that the insurer should have accepted Diego’s claim for the curtain samples. We considered that this was fair because there were grey areas in the policy definitions, many would think that curtain samples were ‘stock’, rather than ‘plant’ and it seemed likely that other insurers would have accepted the claim.
Resolution
The insurer offered to pay Diego the $30,000 for the curtain samples, which Diego accepted, so we closed our file.
Insights
This case is a good example of FSCL’s fairness jurisdiction. FSCL’s rules say that in deciding cases, our Ombudsman must deal with a complaint on its merits and do what is fair in all the circumstances, having regard to the law, codes of practice, and good industry practice. The overarching consideration is fairness. In this case an outcome where the insurer did not pay the claim, in circumstances where the curtain samples could equally have been regarded as stock rather than plant, and where other insurers likely would have paid the claim, would be unfair on Diego.
