The complaints authority has found an insurer was not entitled to deduct an input tax credit from a commercial vehicle payout, citing the policy’s lack of clarity.

Allianz Australia accepted a damage claim and declared a loss of $77,500, but the dispute arose after it deducted the $6191.64 tax credit from the settlement.

The insurer said the complainant was registered for goods and services tax purposes, the vehicle was used for business and it was common practice in that scenario to deduct the tax credit amount, which the insured could claim back from the Tax Office.

The cover was under an agreed value policy, where GST was inclusive, rather than a sum insured policy defined as excluding GST, it said.

But the complainant, which was represented by a third party, noted that when the “comprehensive agreed value” cover type was selected during its policy application, the next field to fill in was “vehicle sum insured”, and $77,500 was entered.

It said the words “sum insured” were capitalised on the policy schedule, which meant the reader was referred to that definition in the product disclosure statement.

The Australian Financial Complaints Authority notes the definition of “agreed value” does not say whether it includes GST, but for “sum insured” it clearly states it is exclusive, and although the product disclosure statement provides separate definitions, the policy schedule uses the terms interchangeably.

“The information provided by the complainant further supports that these terms are interchangeable, and the insurer has not explained this,” the authority adds.

AFCA says the policy wording is unclear and it was reasonable for the complainant to believe the “total vehicle sum insured” was GST-exclusive.

“Given this, it would not be fair for the insurer to deduct the input tax credit amount from the claim settlement,” it says.

The decision is available here.

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