The Australian Securities and Investments Commission (ASIC) has launched Federal Court action against insurer Youi over the handling of a building and contents claim that was examined by the Hayne royal commission.

In a filing made to the Federal Court in Queensland. ASIC alleges Youi breached its Insurance Contracts Act obligations by failing to meet standards imposed by the duty of utmost good faith.

The claim was lodged in January 2017 after a severe hailstorm in the NSW town of Broken Hill two months earlier. The claim took nearly two years to settle and repairs to the home were finally completed in November 2018.

ASIC says Sunshine Coast-based Youi failed to act consistently with commercial standards of decency and fairness with regard to the interests of an insured person.

“In particular, when responding to a claim arising out of damage sustained to the roof of the insured’s home as caused by a severe weather event, Youi failed to handle the claim in a fair, transparent and timely manner,” the filing says.

“As a result, there were lengthy delays to the completion of repairs to the insured’s home.”

The issue was referred to ASIC early last year by the royal commission, which examined the matter through its case study hearings. The details were outlined again in the court filing today.

Policyholder Sacha Murphy told the royal commission that her family was left with an exposed roof, no air-conditioning and a range of other problems as a result of the damage.

Ms Murphy, who was pregnant at the time, was also concerned about being exposed to lead contamination, a recognised issue in Broken Hill.

The royal commission heard that Youi appointed a builder who had been subject to a number of previous complaints and which it had suspended from its approved panel.

The ASIC filing says make-safe works were inadequate and until May 18, 2018 the property was structurally insecure and in a condition that allowed further damage, including through water entry.

It says Youi failed to inform the insured about the issues with the builder and failed to take reasonable steps to consider and respond to a formal complaint made on November 2, 2017.

Youi has acknowledged ASIC’s announcement that it will start civil proceedings in the Federal Court, a statement today saying the company “has previously acknowledged mistakes it made in relation to aspects of the individual claim”.

“Youi is continually looking for ways to improve its customer service and operational performance and has made a number of changes to its claims operations and procedures over the last few years to deliver improved outcomes.”

A time and date for a hearing is yet to be advised.