Hollard Insurance says it supports efforts by the corporate watchdog to improve policyholder outcomes and is co-operating amid legal action over its claims handling.  

The Australian Securities and Investments Commission last week launched Federal Court action against Hollard over a storm damage claim it agreed to cash settle for $1.55 million after a determination by the Australian Financial Complaints Authority.

ASIC is seeking a civil penalty in relation to section 13 of the Insurance Contracts Act.

It alleges Hollard breached its duty of utmost good faith in its years-long handling of the claim by a couple from Scotsburn, near Ballarat in Victoria.

The case sends “a clear message that delays of this magnitude are not acceptable and, in our view, are unlawful,” ASIC deputy chair Sarah Court says.  The “excessive delays” mean the couple’s home is “so riddled with moisture, mould and decay” it now needs to be demolished and rebuilt. “The egregious delay highlights ASIC’s concern about the significant rise in general insurance complaints.”

A Hollard spokesperson told insuranceNEWS.com.au the insurer acknowledges ASIC’s filing of proceedings.  

“We support ASIC’s work in driving positive outcomes for consumers and are co-operating with ASIC in this matter. As this is an ongoing legal matter, we are unable to provide further comment.”

It took nearly three-and-a-half years to resolve the claim, which was lodged at the end of October 2021 for storm damage to the couple’s roof, rear porch, a bedroom and boundary fencing.

The claim was rejected 18 months after lodgement and the couple then turned to AFCA, which found the proximate cause of roof damage was the storm. It required Hollard to have roof and mould restoration experts draw up a statements of work and to pay $10,800 in non-financial loss compensation.

Hollard agreed to cover the cost of temporary accommodation until December 1 this year and to a cash settlement of $1.55 million, which ASIC says had not been paid by April 10.

The policy was part of Hollard’s acquisition of the general insurance business of CommInsure. It retained Construct Services as its agent in handling the claim.  

After the initial storm, there was further damage when roof tiles and capping were dislodged by wind.

But the insurer did not make adequate emergency repairs or arrange temporary alternative accommodation until the end of March 2023, and did not notify the couple until late April 2023 that it would not pay for replacement of the roof.

ASIC says the couple suffered uncertainty and risk of harm while Hollard delayed its assessment of the claim, and were “unnecessarily and avoidably exposed to cold, damp and mouldy conditions for many months.

“Even while there was an imminent risk that the ceiling could collapse, according to Construct Services, it was many months before Hollard provided the insured and family members with temporary accommodation.

“In particular, Hollard conducted the assessment with extended and unnecessary delays by following a non-expert opinion in the face of expert advice.”

A Construct Services file manager – who was not an engineer – attended the property almost a year after the storm and looked in the roof cavity. He said the roof trusses and rafters were “very undersized and not braced adequately for a terracotta roof”, and said a replacement of the roof was required and it might collapse at any moment. 

The following March, he said the home was nearly uninhabitable but the main cause was age or wear and tear.  

The next month, Hollard offered a cash settlement not covering roof replacement, on the grounds damage sustained to the trusses was not a result of the storm – even though three expert reports had concluded the damage was caused by the storm.

ASIC says Hollard acted “on the basis of the non-expert opinion conveyed by [the file manager] , which was not written or appropriately qualified, and without reasoning or proper basis.

“Hollard failed to communicate promptly, clearly and in writing with the insured about what damage it declined, the reasoning and basis for that decision, and the value of the cash settlement that was offered.”

It says the insurer’s claims handling breaches led to unnecessary damage as the home “deteriorated and decayed”. 

“The insured were deprived of a fair opportunity to promptly obtain their own expert advice or to engage contractors to repair the roof and potentially to save their home.”

See ASIC’s statement to the court here.