An estate executor has lost a dispute with IAG after his brother made off with a $373,000 cash settlement for flood damage to their late father’s home.

The brothers – the complainant and a sibling referred to as DB – were co-executors for their father’s estate when a claim was lodged with the insurer following an inundation in February 2022.

IAG paid cash to DB, who had incepted the policy in both his name and that of the estate.

But DB then “absconded with the settlement monies”, according to a dispute ruling from the Australian Financial Complaints Authority.

“The complainant says he was unaware of the claim lodged by DB for damage to the estate property, and subsequent cash settlement,” AFCA said. “The complainant learnt of the claim and cash settlement during court proceedings against DB.”

The complainant later recovered only $52,000 from his brother through legal action.

“DB is impecunious and the complainant says that he will not recover any further money from him,” AFCA said.

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The complainant – seeking compensation from IAG – told AFCA the insurer breached its duty of utmost good faith, duty of care and policy terms because it did not inform him of the claim’s lodgement and settlement.

He said the insurer “had an obligation to notify both co-executors of the claim and its progress” and was wrong to pay DB and not the estate. He said IAG knew the property was held by the estate and that two executors had been appointed, because this information was provided in connection with an earlier policy for the property.

IAG said that, at policy inception, DB told it he was the property’s trustee and provided contact details for him and the estate only. He lodged the claim and provided his bank details for the settlement sum.

It sent some correspondence to an email address provided for the estate, but it was unaware the complainant was a co-executor and “the complainant was not authorised to access the policy, and therefore [IAG] could not contact him without authority from DB, which he did not provide”.

IAG said DB was agent for the estate when he made the claim, and it acted correctly in settling the matter with him.

It was not required to rely on information provided with the earlier policy, and did not “owe the complainant a novel duty to conduct an investigation prior to issuing a cash settlement”.

An AFCA panel says it is “satisfied the insurer was entitled to rely on the apparent authority of an executor unless it was on notice of competing claims or conflicting interests. In the absence of such notice, the insurer was not required to make further enquiries or seek joint instructions.”

See the ruling here.