QBE must increase its payout to the owners of a general store after the dispute authority ruled the business’ underinsurance did not affect the limit of indemnity. 

The store and service station was damaged by fire in 2023 and, after applying an underinsurance clause, QBE paid $275,666 in May last year.

The sum insured was $300,000 and the policy had extras covering removal of debris, environmental upgrades and professional fees for repairing or replacing damaged buildings.

QBE offered to pay an additional $23,700 for debris removal and $12,133 in claim preparation costs. The limit of indemnity was $360,000.

The insureds told the Australian Financial Complaints Authority they accepted that underinsurance applied, but they wanted a further $98,767 in interest, additional claim preparation costs and non-financial loss compensation for stress and inconvenience.

AFCA is satisfied QBE correctly applied the underinsurance clause but does not accept its argument that the maximum amount payable for the extra covers should be $60,000.

It says the underinsurance clause reduces the amount payable for property reinstatement, but there is nothing in the policy stating the maximum payable for the extra covers is $60,000, or that the underinsurance clause affects the limit of indemnity.  

“As the total of the reduced reinstatement figure and the costs falling within extra policy covers exceed the limit of indemnity, the limit is payable.”

The determination says QBE should pay $84,333 plus interest. It must also cover the cost of the insureds’ claim advocate and pay $2000 for stress and inconvenience.

See the ruling here.