Contact us

0800 347 257

I’ve waited 5 years to make a claim on my income protection insurance, and it’s my insurer’s fault I’ve been adjudicated bankrupt.

In July 2011, Martyn broke his wrist and was unable to work for approximately 9 months. For those 9 months, Martyn received payments from the ACC. In late 2012, the ACC advised Martyn it had made the payments to him in error and he needed to repay $12,000.


Martyn’s claim – 2014

Martyn held income protection insurance. In February 2014, Martyn advised the insurer the ACC was seeking $12,000 from him, and that he wanted to make a claim for that amount. The insurer asked Martyn for his income details for the year ending 31 March 2011 (that is, the last full tax year before Martyn broke his wrist), so it could assess his claim. After the insurer followed up with Martyn a number of times, no further information was provided and the claim was closed.


Martyn’s further claim – 2017

In February 2017, Martyn contacted his insurance broker to advise the ACC was demanding payment of the $12,000 and had filed bankruptcy proceedings. The broker told the insurer Martyn wanted to make an additional claim, but did not mention there were bankruptcy proceedings or a court date looming. Martyn followed up with his broker and said he only had a week to sort the claim because he had to appear in court again soon. On 16 March 2017 Martyn advised his broker there was a court hearing set down for the following week.


Insurer advised of the court hearing

It was only on 16 March 2017 that the insurer was advised of the court hearing scheduled for the following week. That day, the insurer completed a full review of Martyn’s new claim suggesting it be paid, but concluded it could not pay the claim until it received further information about Martyn’s pre-injury income. Between 16 and 20 March 2017, the insurer obtained some of Martyn’s financial records from his accountant. By 20 March 2017, the insurer was aware there was a court hearing set down for the next day, and that if the debt was not paid to the ACC by 10am, the court hearing would proceed. However, the insurer still required the further income information to process the claim.


The court hearing

On 21 March 2017, Martyn was adjudicated bankrupt. Neither the ACC or the court had advised Martyn the hearing was still proceeding, and he did not attend the court hearing. Martyn then spent three months and $10,000 annulling the bankruptcy. Martyn did not tell the insurer he had been adjudicated bankrupt.


The insurer’s assessment of the claim

Over the next few months the insurer continued to assess the claim. In June 2017, the insurer advised Martyn it was paying him $14,000 under the policy.


Martyn’s complaint

Martyn sought the $10,000 costs incurred in annulling the bankruptcy from the insurer. Martyn said it took the insurer too long to assess his claim and, if it had been assessed earlier, he would have been able to pay the ACC debt and avoid bankruptcy.


The insurer’s view

The insurer said there was no provision under its policy to recover the costs of annulling a bankruptcy, and it was not fair or reasonable for it to pay Martyn $10,000. The insurer said it was only advised of the court hearing on 16 March 2017, and it was unable to assess the claim before 21 March 2017 (the date of the court hearing) based on the information Martyn had provided up until that point.

Martyn complained to FSCL.



We suggested Martyn discontinue his complaint for the following reasons:

a)                  It was clear that, from as early as March 2014, the insurer was seeking information from Martyn about his pre-injury income. If Martyn had provided the information at that time, the insurer would have been able to assess the claim in 2014, and it was likely the ACC would not have reached the point of having to file bankruptcy proceedings. We accepted that the income information was necessary for the insurer to make a claim decision.

b)                  We noted the insurer was made aware on 14 February 2017 that Martyn wanted it to re-assess his claim. We considered whether the insurer should have been requesting information about Martyn’s income sooner than late March 2017. However, between 14 February and 16 March 2017, the insurer did not know there was a court date looming and, considering 4.5 years had passed since the ACC had advised Martyn he had to pay the debt, there seemed to be no particular urgency around the claim.

c)                  The insurer formed its preliminary view that the claim should be paid subject to receiving the further income information, on 16 March 2017. However, this was also the day the insurer was advised of a court date for the following week. We considered there was not enough time for the insurer to complete its claim assessment ahead of the court date of 21 March 2017.

d)                  We also considered whether the insurer could have advised Martyn on 20 March 2017 that the court hearing was proceeding the following day. However, we considered Martyn was responsible for contacting the court and/or the ACC to confirm whether the hearing was proceeding. In any event, whether Martyn’s appearance at the hearing could have led to the bankruptcy proceedings being adjourned, was unknown.

e)                  It took the insurer three months to make a final claim decision, and we said the insurer could have done a better job in keeping Martyn updated with its progress. However, the insurer remained unaware Martyn had been adjudicated bankrupt and Martyn did not follow up with the insurer. The delay of three months did not warrant any compensation for inconvenience.

Although disappointed, Martyn decided to discontinue his complaint and we closed our file.


Insight for consumers

This complaint highlights that debts do not disappear, and that consumers should make claims and provide all relevant information requested by insurers as soon as possible. Unfortunately, Martyn’s disorganisation in relation to his claim caused him to incur the further $10,000 costs in annulling his bankruptcy.