A policyholder whose petrol station and roadhouse was damaged by a storm has lost an underinsurance dispute because changed operations were not reflected in her business interruption cover.

Landlord protection insurance with loss of rent cover at $75,000 a year was arranged after the owner inherited the leased-out property in a remote Queensland town in 2018.

The policyholder later began operating the business herself through a company. Turnover grew to more than $1.4 million in the year before the March 2022 storm, but the business interruption cover was kept the same as the original loss of rent protection, at $75,000.

The insurer accepted the storm damage claim – the time taken for repairs was also in dispute – and paid $44,318 for the interruption.

The claimant said the insurer failed to advise on an appropriate sum insured. She had noted the turnover increase in a renewal questionnaire sent to QBE’s agent in March 2021 and asked for help “with a proper insurance quote to make sure we are covered”.

The agent’s response included a list of actions for completion. It warned about underinsurance and proposed to email a business interruption calculator.

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Whether the calculator was sent was disputed, but emails between September 29 and October 1 2021 discussed the topic again and the parties agreed to go through it when the agent was next in town.

The Australian Financial Complaints Authority says the questionnaire was “one step in an information-gathering process that had not concluded before the storm”, and QBE was not responsible for the underinsurance.

It says an insurer does not have a duty to advise on coverage but to provide the policy and administer it, including assessing claims in line with its terms.

“I accept the complainant was relying on the agent to some extent. However, the agent did not mislead the complainant, did not assume the role of insurance adviser, and did not fail to follow instructions,” an AFCA ombudsman said.

“While the agent could have been more proactive, that does not shift the responsibility for cover to the insurer.

“There is no record of the complainant giving a clear instruction to increase the sum insured.”

AFCA has also rejected the complaint about delayed repairs. Builder errors did not extend the process unreasonably and “some elasticity in the timeline is explained by the nature of the damage, engineering changes to the scope, and the challenges of co-ordinating multiple trades in a remote location”.

See the decision here.

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