A company director seeking almost $160,000 from Suncorp after he backed out of a property sale agreement because the home was damaged by fire before settlement has lost a claim dispute.

The director held home cover with Suncorp which included fire. Before the insurance policy commenced, his company entered into a contract of sale for the purchase of the property, which he intended to live in and potentially develop.

When there was a fire at the property prior to the purchase settling, he lodged a claim for the damage.

Suncorp began investigations. About two weeks after the fire, it discussed its policy response in circumstances where the purchase of the home was not completed. The day after that discussion, the director had his solicitor rescind the contract of sale, and he received a full refund of the deposit paid for the home.

Suncorp then declined his claim and refunded his policy premium, saying he had not suffered any loss.

The director went to the Australian Financial Complaints Authority (AFCA) seeking payment of $159,353. He said his choice to terminate the property agreement was only made because Suncorp did not offer certainty regarding cover for the fire damage and had he been given this assurance, he would have likely proceeded with the purchase. Not doing so resulted in sustained loss of profits, lost opportunity and financial and emotional impact.

Given Suncorp accepted cover, it had an obligation to pay the claim for fire damage, an insurable event under the policy, the director said, describing Suncorp’s refusal to determine the claim until after the property settlement as an “abuse of power and a denial of his right to certainty”.

Suncorp failed to act expeditiously, placing him in an invidious position, he said. Had it provided clear advice he would have been in a better position to decide whether to go ahead with the contract of sale.

AFCA ruled Suncorp was entitled to decline the claim, saying the “available evidence does not establish the insurer’s conduct caused loss”.

“The insurer could not reasonably have been in a position to advise the complainant of its position … by the time of the imminent settlement,” AFCA said.

“The panel accepts the complainant needed to know whether the damage would be repaired if he went ahead with the purchase but the panel is also satisfied the insurer was not reasonably in a position to give that assurance and was entitled to thoroughly investigate and assess the claim.”

An assessor, forensics and an investigator were appointed promptly by Suncorp, it said.

AFCA acknowledged the impending settlement and the time required to properly investigate the claim “caused a dilemma” for the director and accepted he required an answer from Suncorp to decide whether to continue with the purchase of the property.

However, it said a conversation transcript showed Suncorp’s representative advised the director of the available options and made clear that if he rescinded the contract of sale the insurer would determine there was no financial loss.

“The panel accepts it was unclear or unknown at the time of the conversation how long the review would take and the amount which would be paid under the claim,” AFCA said. “A firm amount for repair costs was not known until the insurer finished its investigation and review.”

Suncorp apologised for the delay in deciding cover and inconvenience caused but said that given the nature of the loss, the matter required time to investigate and it was unable to confirm claim acceptance until that process was complete.

“It was not reasonable for the insurer to commit to pay the claim at that time. It was entitled to first investigate and assess the claim,” AFCA said.

See the full ruling here.