Spencer is the representative of a Body Corporate that manages a large commercial complex. In 2023, an intense period of heavy rainfall and subsequent flooding caused significant water damage to the complex. Surface flooding damaged the complex’s exterior and the ground floor, and roof leaks damaged the complex’s first floor.
The Body Corporate had a material damage insurance policy. The Body Corporate submitted a claim to their insurer for the water damage to the commercial complex.
The insurer applied one of the insurance policy’s exclusions to decline Spencer’s claim. The policy exclusion said that the insurer would not cover the Body Corporate for claims related to the failure of the property’s drainage system.
Spencer complained to FSCL on the Body Corporate’s behalf.
Dispute
The Body Corporate disagreed with the insurer’s decision to decline their claim. The Body Corporate felt that it was unfair for the policy exclusion to apply to their insurance claim, because drainage systems are not designed to handle the volume of rain that had fallen during the flood event.
The insurer said that the policy exclusion applied regardless of the volume of rain that had caused the flooding, because the exclusion was only concerned with whether the complex’s drainage system had failed.
Review
We reviewed the wording of the Body Corporate’s insurance policy, the correspondence between the parties, and the information the Body Corporate submitted to the insurer to support their claim.
In our review, we discovered that the value of the Body Corporate’s insurance claim was $415,000. Before 18 July 2024, we could not investigate complaints where the amount in dispute, or that could reasonably be in dispute, was greater than $350,000.
We explained to Spencer that, under our rules, also known as our terms of reference, we could not investigate the Body Corporate’s complaint because the value of the Body Corporate’s insurance claim, and the total amount in dispute, was greater than $350,000.
Resolution
Spencer accepted our explanation, and the Body Corporate decided to discontinue their complaint.
Insights for consumers and participants
Any complaints that FSCL receives from 18 July 2024 onwards are subject to our new financial limit of $500,000. This means that we can investigate complaints where the amount in dispute, or that could reasonably be in dispute, does not exceed $500,000.