A Suncorp business insurance policyholder who made an unsuccessful claim for loss of perishable food stock caused by the COVID lockdown last year, has won a complaint against the insurer.

The Australian Financial Complaints Authority (AFCA) says the complainant has established a valid claim, ruling the loss she suffered fell within the meaning of “certain sudden, unexpected or unforeseen occurrences” as spelled out in the product disclosure statement (PDS).

“The insurer refers to the fact the damage was not sudden or unexpected,” AFCA says. “However, it is the event which led to the damage that must be sudden, unexpected or unintended, not the damage itself.

“I am reasonably satisfied the staff’s actions were a sudden, unexpected or unintended occurrence, which led to the damage to the stock.”

The woman had lodged her claim after finishing two weeks of quarantine and realised the food stock had spoilt when her staff did not store it in the freezer as instructed.

She was interstate before the lockdown was imposed in March last year and knowing she was unable to change her business to takeaway only, she told her staff to salvage any perishable food and put it in the freezer.

The complainant says the proximate cause of the loss was the staff forgetting to put the items in the freezer.

But Suncorp argued the damage was not sudden or unexpected, relying on an exclusion for gradual deterioration contained in the policy. It accepts the damage was unintended but says the spoilage of the food items was expected given that they were perishables.

The insurer also refers to other exclusions under the property section of the PDS to support its arguments. One of the exclusions specifically says the policy does not cover for loss or damage caused by variation in temperature.

Suncorp also referred to a general exclusion called consequential loss, which applies to all policy sections in the PDS. The exclusion means the policy does not insure loss of use, loss of earnings capacity and other consequential loss.

But AFCA dismissed the insurer’s position.

“I do not consider the damage claimed amounts to consequential loss,” AFCA says. “This is because the information shows the complainant’s claim is for property damage due to a sudden, unexpected or unintended occurrence.”

AFCA says if the complainant accepts its determination, she must then provide Suncorp with further information regarding the value of the lost stock. This is to help the insurer to assess a loss quantum for the claim.

Click here for more on the ruling.