An insurance claim that Hollard Insurance took nearly three and a half years to resolve is at the centre of a new Federal Court proceeding brought by ASIC.
ASIC alleges Hollard Insurance breached its duty of utmost good faith in its handling of a home building and contents insurance claim made by a couple from regional Victoria.
The insurance claim was made on 31 October 2021, two days after a major storm damaged the roof of their home, but the couple were made to wait 18 months for their claim to be rejected.
Hollard initially accepted the claim, then repeatedly delayed decisions about repairs, then took over nine months to initiate an inspection by a structural engineer and delayed providing temporary accommodation to the couple.
Hollard rejected the claim in late April 2023, relying on a non-expert opinion over prior expert reports on the cause of the damage. The couple rejected a modest cash settlement offer by Hollard and lodged a complaint to the Australian Financial Complaints Authority (AFCA).
ASIC alleges that the combination of delays in decision making, poor communication and ignoring expert advice exposed the couple to unnecessary and prolonged harm, and breached Hollard’s duty of good faith in handling the claim, as implied by the Insurance Contracts Act.
ASIC Deputy Chair Sarah Court said, ‘In the end, because of the excessive delays by Hollard and the failure to undertake make-safe works, the home has become so riddled with moisture, mould and decay that it is uninhabitable and now needs to be demolished and rebuilt.
‘The egregious delay highlights ASIC’s concern about the significant rise in general insurance complaints reported to AFCA since the 2022 floods, particularly those involving claim delays. We are taking this case to send a clear message that delays of this magnitude are not acceptable and, in our view, are unlawful. The consequences of Hollard’s actions have caused significant harm to the policyholders who remain without their own home three and a half years later.’
ASIC is seeking declarations and a civil penalty in relation to s 13 of the Insurance Contracts Act.
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Background
Hollard Insurance Partners Limited (formerly known as Commonwealth Insurance Limited), with a 4.4% share of the general insurance market in Australia, is the fifth largest general insurer in the country. It has an estimated annual revenue of around $2.308 billion for FY 2024 and employs over 1,600 people. On 30 September 2022, Hollard’s parent company, Hollard Holdings Australia Pty Ltd, completed its purchase of Commonwealth Insurance Limited.
Since 1 January 2022, insurers who provide claims handling and settling services have been obligated under their Australian financial services licence to provide those services efficiently, honestly and fairly. Insurers handling claims were already obliged to act consistently with the duty of utmost good faith.
ASIC is undertaking ongoing work in relation to home insurance claims handling. In December 2021, ASIC reported findings from a review of the 2019–20 Black Summer bushfires (involving over 8,800 claims across 12 insurers).
In August 2023, ASIC’s Report 768 Navigating the storm: ASIC's review of home insurance claims (REP 768) called on general insurers to improve their claims handling practices and resourcing after our review of home insurance claims found weaknesses across five key areas. ASIC has been monitoring general insurers’ responses to the findings of REP768 and will be publishing findings related to this shortly.