Morgan owned an investment property as part of a body corporate in an apartment complex. The body corporate arranged the insurance for the entire complex, including Morgan’s apartment.
Water damage discovered in 2008
In 2008 some tenants in the complex discovered water damage in their apartment. The source of the water was traced back to Morgan’s apartment. When the apartment was built, the pipes supplying hot and cold water to the shower had not been properly secured. As a result, every time the shower was used, joints in the pipe moved and over time a leak developed.
Claim accepted, damage repaired and paid for by insurer
The insurer accepted the body corporate’s claim, agreeing the body corporate’s builder could repair the damage to all affected apartments, including Morgan’s apartment. In early 2009, once the damage had been repaired, the body corporate secretary signed a discharge, accepting the amount paid by the insurer in full and final settlement of the claim.
Water damage discovered in 2015
Six years later, in 2015, Morgan’s tenant complained about a mould/moisture problem in the apartment. Morgan considered the current problem was likely to be related to the 2008 repair and contacted the insurer.
Insurer declines responsibility
The insurer did not agree it was liable for the current problem because:
- it was no longer the body corporate’s insurer
- the repair was undertaken 6 years ago
- the body corporate had signed the discharge
- any problem with the reinstatement of the shower should be directed to the builder who carried out the repair.
Internal complaints process deficiencies
Morgan did not accept the insurer’s response and spent a year trying to have his complaint addressed within the insurer’s internal complaints process. The insurer did not tell Morgan he could refer a complaint to FSCL. Eventually Morgan contacted his lawyer, who directed Morgan to us. We then began our investigation into Morgan’s complaint.
Morgan considered the insurer was liable to pay for the repair of the damage discovered in 2015. The insurer paid for the 2008 repair, and because that repair was substandard Morgan considered the insurer remained liable for the damage. Morgan said the insurer could not avoid liability by relying on the discharge because he did not authorise the body corporate to sign the discharge on his behalf. In Morgan’s mind, the insurer was liable for the 2008 damage and it had not been satisfactorily repaired.
Insurer discharged in 2009 – not liable for 2015 damage
We found the insurer was not liable for the 2015 damage. The insurer no longer insured the body corporate, and we considered the 2008 claim had been concluded when the body corporate secretary signed the discharge in 2009. The insurer was
insuring the body corporate, and not Morgan. The body corporate secretary did not sign the discharge as Morgan’s representative, but as the insured.
No contractual relationship between insurer and builder
It was also our view that there was no contractual relationship between the insurer and the builder. The insurer was not warrantying the builder’s work. Any contractual relationship was between the builder and the body corporate. Unfortunately, the builder was no longer in business, so the body corporate’s action against the builder may have been extinguished, but this did not mean the insurer became liable for the defective work.
Internal complaints process concerns
However, we were very concerned about the insurer’s internal complaints process. The insurer appeared to have passed responsibility for responding to the complaint to its assessor. While the assessor was in close communication with the insurer, the assessor seemed to have no knowledge of the insurer’s internal complaints process or us. Even when Morgan wrote directly to the insurer the complaint was dismissed without referral to FSCL. It was only Morgan’s tenacity, and the good advice from his lawyer, that saw the complaint reach FSCL.
In addition to concerns about the insurer’s internal complaints process, the insurer took almost three months to give us its response to Morgan’s complaint.
While we were unable to uphold the substantive complaint, we proposed that the insurer pay Morgan $1,000 as compensation for the inconvenience associated with its internal complaints process, and the delay responding to us.
The insurer accepted our proposal, but Morgan initially did not. Morgan considered the insurer was trying to wriggle out of its responsibility by relying on the discharge signed by the body corporate secretary. Morgan remained of the view that because the insurer had paid for the repair, it was liable for ensuring the quality of that repair.
We considered Morgan’s submissions, but were not persuaded to alter our view. We recommended Morgan discontinue his complaint about the 2015 damage, but recommended the insurer pay Morgan $1,000 as compensation for inconvenience as we had earlier proposed.
Morgan accepted our recommended settlement.
Even if an insurer considers a complaint has no merit, and passes responsibility for responding to a complaint to a third party, it must ensure information about the ability to refer a complaint to FSCL is available to the complainant.