AIG has been directed to make a total loss payout to a woman claiming $US15,500 ($21,709) for damage to a marble coffee table she bought more than a decade ago.

In a claims dispute ruling, the Australian Financial Complaints Authority (AFCA) told AIG and the homeowner to work together and agree on the table’s value just before it was damaged. If unable to agree, they should return to AFCA armed with up-to-date valuations.

AIG had argued that the table could be repaired and the policy entitled it to do so, but AFCA disagreed. 

“It is fair and consistent with the policy’s intention that the insurer must settle the complainant’s claim on a total loss basis,” AFCA ruled.

However, AFCA said the table’s purchase cost, which dated back to 2008, did not necessarily reflect the table’s value at the time it was damaged. AIG’s liability was limited to the table’s "present value" – the cost of replacing the table immediately preceding the damage, up to the policy’s sum insured with allowances for wear and tear and depreciation.

The woman held a home and contents policy with AIG, which underwrites Mansions of Australia insurance.

AFCA said the use of "mansions" in the insurance product’s name “conveys an impression” it was targeted at wealthier consumers. Policyholders could “reasonably be expected to have more brand name, high end or luxurious home contents,” AFCA said.

It also implied policyholders would require any repair work be done “to more exacting requirements” to preserve authenticity or high-end values.

AIG said the woman had the option to insure the table as a special item but failed to do so. AFCA said this did not matter as the relevant policy wording applied to contents that were insured generally.

AIG also said the table could be repaired under the terms of the insurance policy, but the homeowner said a repair would cause the table to lose its “brand authenticity”

AFCA noted marble is a natural resource and two slabs of marble are unlikely to have identical patterns.

“This essentially means the table cannot be restored to an exactly ‘equal’ condition. However, the insurer made a promise to do this, so it must be held accountable,” AFCA said.

Having the table repaired by anyone other than the original manufacturer - a well known brand name which AIG indicated was no longer operating - or its approved agents would not restore it to a condition "equal" to its condition as new, which is what the policy promised.

AIG had failed to prove it could do this, so AFCA ruled it was “fair it settles the complainant’s claim on a total loss basis and pay the table’s value immediately before the claimed loss occurred”.

“The table can no longer be considered the relevant brand’s table if it is repaired by any other party,” AFCA said. “The insurer could at best only be said to have restored the table to a ‘similar’ condition as when it was new. This would be inconsistent with the policy’s promise and not be a fair and satisfactory discharge of the insurer’s policy obligation.”

Click here for the full ruling.