A policyholder will have her claim for storm-damaged contents paid in full after the ombudsman rejected her insurer’s limit on items in the “open air” due to its unclear wording.

The contents were in a patio area that IAG said was not fully enclosed or lockable, so under the policy terms cover was limited to 10% of the $98,800 sum insured.

The Australian Financial Complaints Authority has rejected the complainant’s view that the items were not in the open air.

It notes the patio had plastic blinds on two sides but is not satisfied they were lockable, and a video showed the blinds were not down and had gaps at the edges.

However, the authority says the 10% limit should not be imposed due to the policy wording and presentation.

If the insurer intended the “contents in the open air at the site” wording to be a limit, it should have placed it in a different policy section, rather than under the heading “additional benefits”. It also uses the term “extend”, which is the opposite of “limit”, the authority says.

“Commercial purpose and policy intent are considered when interpreting policy wording. However, they do not allow an insurer to apply a policy in a way that is inconsistent with what is written in the policy wording,” an AFCA ombudsman said.

“I am not satisfied the insurer’s stated intent is clear from a plain reading of the policy wording.”

AFCA also finds the insurer cannot decline the claim on the basis the complainant did not take reasonable care to protect the items, saying it has not sufficiently explained what steps should have been taken, or shown the policyholder was aware of the risk.

The complainant said her family’s health was affected by living for almost a year with mould-affected internal items due to the delayed settlement.

The insurer had agreed to arrange assessment, remediation and disposal of mould-affected items and offered $1558 – a sum already paid for some of the contents damage – as an ex-gratia payment, while noting no evidence of ill health.

AFCA has ordered a payment of $4000 for non-financial losses, saying medical evidence is not required to find mould interfered with the “expectation of enjoyment or peace of mind”.

Given the complainant’s personal circumstances, AFCA says the insurer should engage an expert to assess the contents, including the mould-damaged items already accepted.

The insurer is entitled to deduct the $1558 already paid and any applicable excess from the settlement.

The decision is available here. 

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