Underinsured landlord loses claim for additional payments

A landlord who sought additional funds for his building fire claim after saying his insurer failed to inform him that he was underinsured has lost his claims dispute.

The residential building policy covered $185,400 for rebuilding costs and $16,900 for 52 weeks of lost rent, both of which Terri Scheer paid on August 25 last year.

However, the complainant said the amount insured was insufficient to cover the costs and asked for $131,355 extra, saying that Terri Scheer was negligent for not informing him that he was underinsured.

The Australian Financial Complaints Authority (AFCA) ruled that the insurer did not have to inform the man that his property was underinsured, saying that the policy terms were “clear and unambiguous”.

The complainant began his policy with Terri Scheer in 2015 with an initial sum insured of $250,000, but on three separate occasions, amended it to reduce the cost of the policy’s premium.

The man said he was unaware that his house was underinsured and that the insurer should have alerted him to an appropriate sum that would cover damage in the event of total loss.

He referred to a policy he owned with a different insurer for a separate property that did not allow insured sums to drop below specific amounts to prevent underinsurance in the event of a total loss.

Terri Scheer said that its consultancy only informs clients of the cost of premiums and does not advise clients on how much they should insure their property for.

The insurer said it could only cover the amount instructed by the policy and that the homeowner should have ensured that the property was adequately insured.

AFCA dismissed the landlord’s claims and said the onus was on him to be aware of the possibility that he was underinsured.

The panel said the homeowner had opportunities to conduct assessments for rebuilding costs in the event of a total loss and that he should have certified that his insurance appropriately covered the damage.

AFCA ruled that the insurer pay costs adjusted to inflation, increasing the initial damage cover to $188,645.

The ruling outlined that the policy would cover “reasonable legal costs” for mortgages in the event of a total event loss and said that if required, the insurer would have to pay costs associated with the discharging of the property’s mortgage.

Click here for the full ruling.