RAC Insurance must pay a food spoilage claim after losing a dispute over a $500 excess.

Its customer lodged a claim after a 28-hour power failure at his home in March last year. The man reported about $1500 worth of food spoilage and provided an inventory with costs.

The insurer agreed he was covered under the additional benefits section of his home and contents policy but said it was not required to pay because his cover for food spoilage was limited to $500, and there was a $500 excess when making a claim.  

The claimant told the Australian Financial Complaints Authority this was unfair and had rendered the food spoilage cover redundant, and said the policy did not adequately disclose that an excess applied.

The complaints authority has ruled RAC Insurance was unclear about whether an excess applied and did not fairly assess the claim. It says the insurer must forgo the excess and pay $500 for the food spoilage.

“The insurer has not shown that the policy’s food spoilage benefit is subject to an excess. At a minimum, the policy is unclear about this, so it would not be fair for the insurer to impose one,” AFCA’s ruling said.

“The insurer has not successfully shown it can refuse to pay ... it is fair for the insurer to meet the complainant’s claim up to the applicable policy limit, with interest.”

RAC Insurance relied on page 32 of its product disclosure statement, which said: “More than one excess may apply to your claim.”

AFCA says the word “may” implies there could be instances when an excess would not apply.

“If the provision was meant to say an excess applies to any claim, it could have just said so,” the authority’s adjudicator said. “I am not satisfied the ... provision shows the complainant’s food spoilage claim is subject to an excess.”

AFCA says the insurer’s examples of when an excess applied appear to relate only to claims for building, contents, personal valuables and contents accidental damage.

Product disclosure statement provisions indicate a basic contents excess was applicable only to claims under the main contents cover.

It “does not automatically follow” it applied to the additional benefits cover, AFCA says.

“The complainant’s food spoilage claim falls under the policy’s ‘your contents additional benefits’ cover. This implies the cover is separate and different from the policy’s main contents cover. The insurer’s submission that the claim does not fall within the main contents cover further supports this.”

RAC Insurance had said the claim did not fall within the main contents cover because there was no evidence the power failure was caused by an insured event, such as a storm.

See the ruling here.