An Australian Financial Complaints Authority (AFCA) panel has required QBE to complete repairs to a home significantly damaged by fire in 2017 and further compensate the property owner after it was found to have poorly handled the claim. 

The homeowner lodged the claim shortly after the fire in October 2017, which the insurer accepted and appointed a builder to complete repairs.

However, disputes arose after the claimant raised concerns about the builder’s work and conduct, saying that they used the wrong timber to repair the roof framing and had forged her signature on a document approving a building surveyor.

QBE accepted the insured’s complaints and removed the builder in July 2018. It engaged with a second builder, who went into administration shortly after being hired. A third builder, referred to as B3, was appointed and began conducting repairs in January 2019.

The complainant informed the insurer that she was concerned about the building’s foundation after noticing new cracks and hired an engineer, referred to as N, to inspect the property. N says the footing had moved due to water falling from a “make-safe” roof tarpaulin into the soil beneath the property.

The engineer recommended stabilising the building with a resin injection to expand the soil, which was done in December 2019 and said repairs should begin about three months after the process.

But the repairs continued to be delayed throughout 2020 and 2021 due to covid-related factors, as well as B3’s request to have a new scope of repairs prepared. The builder resumed repairs in March last year but paused after raising concerns about the building’s foundation.

QBE appointed an engineer who determined the footing to be unstable after identifying a “category 3” crack in the building’s northeast corner and continued movement following the underpinning in December 2019.

The insurer informed the complainant that it would not continue with the repairs in July, saying it would be “futile”. It offered the homeowner a cash settlement of $585,675 for costs relating to the demolition and rebuilding of the home and compensation for a loss of rent.

The complainant rejected the offer and challenged the insurer’s assessment that the foundation was damaged, noting that one of its engineers said it was “suitable for re-use”.

The insured also highlights the identified “category 3” crack was a gap left by B3 after they removed mortar from the area shortly after the resin injection. 

She pursued QBE to complete the works, saying that it would be difficult for her to find another builder and that completing the insurer’s repairs would be “much quicker than demolishing and rebuilding the house”. 

AFCA agreed with the complainant’s assessment of the building’s foundation, saying there had been no available information to indicate that there had been prominent movement or cracking since 2019. 

The panel says the insurer’s offered cash settlement was “not fair to the complainant”, noting that the homeowner would be “significantly disadvantaged” if the repairs were left to her. 

“The insurer says the complainant could use the cash settlement to complete the repairs,” AFCA said.

“However, the panel believes it would be difficult for the complainant to find a repairer willing to complete work started by the insurer’s builders (and such work would not come with a warranty).

“If the insurer cash-settles the claim, the complainant may be forced to demolish and rebuild the house, which could take years longer than completing repairs.”

The panel says it “generally considers that if an insurer starts repairs, it should finish them,” and that it would be unsatisfactory for it to abandon repairs unless it could indicate that it could not complete them. 

The ruling also required the insurer to continue to pay for any rental losses until a month after the completion of repairs.

Additionally, AFCA awarded the complainant $5400 for non-financial losses, the maximum amount available, for QBE’s mishandling of the claim. It says that if the insurer had managed the claim properly, it should have been completed in 2018. 

“The insurer’s mishandling of the claim has delayed its resolution by about five years,” AFCA said.

“This has caused the complainant a great deal of stress and inconvenience.

“The complainant has spent an inordinate amount of time and effort dealing with the claim (far beyond the usual amount of inconvenience involved in making a claim).”

Click here for the ruling.