A Queensland driver has won a claim dispute after her insurer sought to have her car written off at current market value - six years after it organised problematic repair work - rather than pay a $14,000 rectification bill.

In 2013 the car was damaged by hail and IAG organised repairs in 2014. Due to those repairs, substantive rectification works are now required, and the owner sought a cash settlement for the quoted cost.

IAG said it would be uneconomical to rectify the inadequate repairs given the car was now worth only $8300, and argued it was a write-off under Queensland state legislation.

The Australian Financial Complaints Authority (AFCA) ruled IAG had not acted fairly or reasonably and the repairs should be paid for, and compensation made.

“The insurer here is seeking to write-off the vehicle based on a market value that was substantively after the claimed event,” AFCA said.

“The event was the poor repairs in 2014. In this case, the insurer has relied on a market value assessment dated June 2020,” AFCA said. “This was well after the event and would substantively diminish the pre-incident market value given it includes both the poor repairs and the vehicle’s depreciation over six years.”

It ruled IAG should accept the quote from the policyholder’s chosen repairer - with a 10% contingency rather than the 15% she requested - and also pay compensation.

IAG relied on Queensland legislation stating a vehicle is a total loss when damaged by an accident, collision, demolition “or other events” ... when the cost of repairing the vehicle for use would be “more than the vehicle’s fair market value immediately before the event that caused the damage”.

IAG said inadequate rectification works fell within "other events" but AFCA said there were “several issues” with IAG’s position.

“First, it is not clear that ‘other events’ in the legislation includes poor repairs done by an insurer. Second, even if it does, the insurer has not followed the legislation as it specifies “immediately before the event”.

AFCA backed the driver’s request that IAG provide $2500 compensation for time lost during the rectification and complaint process, and an additional $1500 in compensation for her advocate and expert witness.

However, it rejected her request for a refund of premiums paid since the car was garaged.

“The insurer was on risk for any additional damage that may have occurred. For example, if the garage collapsed or a fire occurred. Therefore, it was entitled to charge premiums,” AFCA said.

See the full ruling here.