A freight services provider whose consignment of prawns was sold at a 50% discount after an employee erroneously cut the security seal on a third-party container holding the stock will have the loss covered after winning a claims dispute against the insurer.

The Australian Financial Complaints Authority (AFCA) says the circumstances of the $US40,005 ($62,334) loss fell within the Accident and Transit provisions provided by its Zurich-issued Goods in Transit Carriers policy.

Bruce Chiene Insurance Brokers told insuranceNEWS.com.au that it had arranged the policy for the freight company, which already had a Logistics Liability cover in place with Zurich before taking up the second policy.

The Goods in Transit Carriers policy was arranged as a goodwill contract to cover instances which may not have been covered under the Logistics Liability cover.

“Our industry, rather than looking for ways to get out of paying for claims, needs to look for ways to pay claims,” Bruce Chiene Insurance Brokers Director Scott Hardiman said. “Simply, we need to do better.”

Zurich had initially declined cover on the basis the goods were not in transit at the time the seal was damaged and that the stock was instead held in storage, according to details provided by AFCA in its ruling of the dispute.

The insurer also maintains, for the purpose of the policy, that Goods means the container and the shipment of prawns that were being transported in the container. It says although the seal was cut and damaged, it is an external component attached to but not forming part of the container.

Zurich also says cover under the policy is only triggered if there is physical loss or damage to goods, which was not the case in this dispute.

But AFCA dismissed the insurer’s position, ruling it has not sought to decline the claim on any other grounds other than saying a valid claim has not been established.

AFCA says the policy, which provides comprehensive cover for loss of or damage to third-party goods, or death of livestock subject to exclusions, applied to the loss suffered by the complainant.

AFCA says while the term Accident is not defined in the policy, the meaning of the word in insurance refers to “an event that is unexpected and unintended from the insured’s perspective”.

“There no dispute the error by the complainant’s employee in damaging the seal was unexpected and unintended from the complainant’s perspective,” AFCA says. “As such, I accept the damage was caused by an accident for the purpose of the policy.”

AFCA also touched on the term Transit, accepting the complainant’s submission that the container was not in storage and that it remains in transit until such time it is delivered into the custody of the customer.

The container was in a holding yard, where it was to be inspected by the relevant government authority before being delivered to the complainant’s customer. But in June last year, the complainant’s employee erroneously cut and damaged the seal, mistaking the container for another.

As a relevant government officer was not present when the incident occurred, the container had to be destroyed or exported out of Australia under quarantine laws and bio-security requirements.

To mitigate the loss, the owner of the container was able to find a buyer in Singapore, who agreed to pay $US37,422 ($58,502) for the stock, or 50% of the value of the prawns plus additional freight costs of $US2583 ($4038).

The complainant was seeking cover under the claim for the container owner’s reduced loss.

Mr Hardiman says the client was affected by the dispute, almost losing a major customer because its claim was rejected by Zurich.

“It has been a long and tough road for this outcome,” he told insuranceNEWS.com.au.

Click here for the ruling.