An electric vehicle conversion business that had a fire damage claim denied and its policy cancelled over non-disclosure of imported batteries has won a bid to overturn the decision.

The business lodged two claims, in August 2022 and February last year, both involving lithium-ion battery fires.

The first related to a Chrysler that was stored at the business’ property for upgrades when its battery caught fire. The battery had been installed 11 months before the blaze, after being bought second hand by the business in 2017.

The second claim involved a Toyota Camry and a recently installed battery storage system. The fire damaged several other vehicles.  

Hollard Insurance accepted the first claim but declined the second. It said the claimant failed to declare it had been importing batteries, despite being asked about it in policy documents, and argued it would not have offered insurance if it had been aware.

The insurer relied on a report from its loss adjuster and forensic fire investigator, who said the business had bought batteries in 2017 that were originally from the United States. The investigator also said the batteries involved in the second fire were sourced from China.

The complainant did not deny using imported batteries at the time of the second fire, but said it answered questions honestly at policy renewal on August 10 2022.

The business said it did not store batteries from China before the renewal, and then on August 16 ordered the one that caused the second fire. It said if it had been aware the imported battery would affect its insurance, it would not have bought it.  

The claimant said the batteries purchased in 2017 had been bought through a Brisbane company, not directly from the US.  

In its ruling on the dispute, the Australian Financial Complains Authority says the insurer’s question relies on a consideration of whether the business “directly imports materials”.  

“Given the global nature of the automotive industry, it is likely many Australian mechanics and repairers use imported parts despite not importing the parts themselves,” the authority’s ombudsman said.  

“I am not persuaded that a reasonable person in the complainant’s position would consider this relevant to the insurer’s decision to take on the risk given the question concerned direct importations.

“I am satisfied that an applicant for insurance is only required to answer ‘yes’ if the business is directly importing the parts from overseas, rather than ordering them through an Australian intermediary.” 

AFCA accepts the insured ordered batteries direct from China, but says this was after the 2022 policy renewal and does not constitute a policy non-disclosure.

It says there is insufficient evidence the batteries from the US would meet the definition of “directly imported”, noting the insurer did not raise the issue when accepting the claim.

The authority requires Hollard to reinstate the business insurance policy and settle the second claim. 

Click here for the ruling.

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