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Federal Court declares Youi breached insurance law

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The Federal Court has ruled Youi breached Insurance Contracts Act requirements on five occasions in its handling of a Broken Hill hailstorm claim that was the subject of a Hayne royal commission case study.

Chief Justice James Allsop says the insurer failed to act with utmost good faith in relation to the property repairs and in responding to policyholder complaints.

The legal action seeking declarations was launched by the Australian Securities and Investments Commission (ASIC) earlier this year following referral from the royal commission.

The regulator says the case has important warnings for insurers about conduct that breaches the duty of good faith, and about the rights of insureds in relation to how their claims are handled.

“ASIC expects those involved in handling insurance claims to act consistently with the commercial standards of decency and fairness, ensuring claims are handled in a fair, transparent and timely manner,” Commissioner Sean Hughes said.

“The value of an insurance policy is in the promise, so that a consumer can feel confident and secure that they will be looked after when something goes wrong.”

At the time the events happened, the Insurance Contracts Act didn’t impose monetary penalties, but that has changed for offences taking place since March 13 last year.

The Broken Hill claim was lodged by policyholder Sacha Murphy with Youi in January 2017 after a hailstorm caused extensive damage to the property. After continual delays, repairs were not completed until some 22 months later.

Youi says it acknowledges its response to Ms Murphy’s claim was inadequate and accepts the Federal Court judgment. The insurer has since reviewed its service provider network and the management of repair quality, and has improved temporary accommodation and customer complaints processes.

“Youi has made significant changes to the way claims are managed to ensure repairs occur in a timely manner and all customers consistently receive outstanding service,” a spokeswoman told insuranceNEWS.com.au.

Hailstorms at the time swept across NSW, Victoria and South Australia in an event that was declared an insurance catastrophe.

Justice Allsop says from May 2017 until late December or January 2018 Youi failed to inform the insured that contractor ProBuild Australia had been the subject of complaints, was no longer one of its recommended providers, and it didn’t offer the opportunity for an alternative repairer.

Youi also failed to take reasonable steps for months to ensure any builder started repairs, or that make safe works were carried out.

The policyholder made a formal complaint on November 2 2017, outlining six pages of issues including lead contamination concerns, but the court says the insurer failed to take reasonable steps to consider and respond to the letter until at least May 18.

From February 20 2018 to April 5 2018 Youi also failed to adequately respond to an email raising concerns over a scope of works provided by another contractor, thereby further delaying repairs.

Justice Allsop says “decency and fairness were not exhibited by Youi” in its handling of the claim.

The court decision is available here.