A business seeking a payout of more than $200,000 for repairs to a property built in the 1970s has won a claim dispute hinging on whether it was underinsured. 

The parties disagreed on the cost to reinstate the insured property to its condition at policy inception in 2021.

QBE said it had to pay only a proportion of the claim due to an underinsurance provision. It initially said this reduced its liability to $105,364. It later offered $142,894.  

But the business denied it was underinsured and sought $218,084.

It provided contractor quotes to the Australian Financial Complaints Authority that estimated the value of the insured property in 2021 at $747,530 – much lower than a $1.39 million assessment by QBE’s quantity surveyor.

AFCA says QBE’s surveyor report was “to be only used as a guide”, while the business provided “real quotes” from local tradespeople.

“The complainant provided detailed quotes. I am satisfied these provide an accurate picture of the reinstatement costs for the insured property,” an ombudsman said.

QBE must settle the claim based on a recent repair quote of $148,173, with a 20% uplift for contingencies, plus interest.

AFCA says a declared value of $721,000 in the policy schedule was above 80% of the value at risk if using the policyholder’s contractor quotes, not the QBE surveyor’s figure.

This means QBE should not apply its underinsurance provision, as the threshold was not met.  

QBE argued the quoted repairs were for a “kit shed” rather than the original “universal beam steel building”, and said they did not reflect a like-for-like replacement.

But the business said it would be impossible to construct the same building now as in 1978-79, and the quotes achieved the reinstatement standard required under QBE’s policy – “similar function, output and construction of the original property”.

AFCA’s ombudsman said: “The policy refers to ‘similar’ construction. ‘Similar’ requires only a likeness in a general way. This allows for differences resulting from changing construction methods ... I am not satisfied the information shows it does not otherwise achieve the same standard in terms of function and output.

“I am accordingly satisfied the complainant’s quotes achieve the standard of similar in terms of the function, output and construction.”

The business also sought $29,500 for debris removal, explaining that before QBE attended the property, it accepted an offer from a reality TV show to do the job.

AFCA says QBE’s lower offer of $5070 is reasonable.

“I am not satisfied the invoice for $29,500 can be considered a cost incurred in these circumstances. The information does not show the complainant was charged for the works.”

Compensation for non-financial loss was also denied.

See the ruling here.