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Issue 20 - January 2015

Case Studies

 

This is a collection of case studies relevant to topics covered in this edition of The FOS Circular. It includes the case studies from the two FOS Approach documents in this edition – covering terms of settlement, and insurance claim delays. You can read more about our approach to this and other issues by visiting www.fos.org.au/approach. More case studies are available on our website at www.fos.org.au/casestudies.


Insurance claim delays case 1: FSP did not unreasonably delay repair

The applicant claimed for damage to her motorcycle, which the FSP accepted and authorised its repairer to repair. However, the repairer could not complete the repair for more than a year because:

  • some parts were unavailable locally and had to be ordered from overseas
  • there were delays in the delivery of the parts.

FOS did not consider it appropriate to award compensation in this case because the evidence showed:

  • the FSP did not unreasonably delay the repair
  • the FSP was experiencing a genuine difficulty in sourcing the parts locally
  • the motorcycle was an imported model and its parts were not readily available locally
  • the repairer ordered the required parts from overseas early in the claims process and, in the meantime, painted most of the parts it had
  • the applicant was told that there would be a delay early in the claims process as parts had to be ordered from overseas.

 

Insurance claim delays case 2: Applicant received compensation after unreasonable delay by FSP

The applicant claimed for damage to her car, which the FSP accepted and authorised its repairer to repair. However, the repairer did not complete the repair for some 9 months because of:

  • the lack of a wiring harness that had to be ordered from overseas
  • there was a delay in the delivery of the part.

FOS considered it appropriate to award compensation in this case because the evidence showed:

  • the FSP had unreasonably delayed the repair
  • the FSP authorised the repair to its preferred repairer without finding out if the applicant’s preferred repairer or other repairers were able to complete the repair more quickly
  • the FSP did not try to source the unavailable part elsewhere
  • the FSP did not make any reasonable attempts to speed up the repair
  • the FSP gave the applicant several estimated completion dates, although it had no idea when the part would arrive from overseas or the repair would be completed
  • the applicant was overwhelmingly left on her own to pursue the claim
  • the FSP asked the applicant to chase the manufacturer for the part, although it undertook the obligation to repair
  • the vehicle was poorly repaired

The applicant was awarded:

  • compensation for financial losses arising from the FSP’s delay, such as storage cost, subject to her supplying evidence of the loss
  • $3,000 for being subjected to unusual inconvenience, delays and interference with her enjoyment of her car

 

Terms of settlement case 1: Unclear third party settlement payment prevents a claim

The applicant had a joint account with her husband and either could make withdrawals. Their relationship assets were:

  • the home, valued at $500,000 (each had a 50% share)
  • $100,000 in the joint account.

Before her husband died:

  • he changed his will, leaving all his assets, including his share of the house, to her step-daughter rather than to her, as had been the case
  • she transferred $50,000 from their joint account into an account in her name only
  • he then transferred that $50,000 into an account in his name only.

After her husband died, the applicant made two claims against both his estate and her stepdaughter:

  • that his new will had been made under duress and was not valid
  • for the return of the $50,000 he had transferred from her account.

She settled this claim in exchange for a lump sum of $100,000. But the settlement did not apportion that payment between her two claims.

She then lodged a claim with us against the FSP for the $50,000 it had allowed her husband to withdraw from her account without authority.

We took the view that:

  • the FSP had breached its obligations to the applicant by allowing the unauthorised withdrawal
  • settling the claim with the estate and her step-daughter did not prevent a further claim against the FSP because it was not a party to that settlement.

However, we could not determine if the applicant had been fully compensated for $50,000 taken from her account because her lump sum payment had not been apportioned. We could not consider the dispute.

We could have done so, for instance, if the previous terms of settlement had specified that in the settlement sum:

  • $80,000 was for her claim the will was invalid
  • $20,000 was for her claim about wrongful access to her account.

She then could have made a claim against the FSP for the remaining $30,000 for wrongful account access.

 

Terms of settlement case 2: Broad settlement terms allowed a further claim

The applicant had a home loan with the FSP and fell into default after losing his job. After unsuccessfully negotiating with the FSP to vary the loan repayments due to financial difficulty, the applicant lodged a claim with us.

The dispute was settled with an agreement the applicant could make lower monthly repayments for three years. The terms of settlement were broadly in satisfaction of ‘all claims’ against the FSP.

One year later, the applicant lodged a further claim against the FSP about being misled over the home loan interest rate. The FSP argued we would not consider the dispute as the applicant had previously settled ‘all claims’ against it.

We took the view that despite this broad expression in the previous terms of settlement, it applied only to applicant’s initial dispute with the FSP over the lowering of the loan repayments.

We accepted that the applicant could make the further claim against the FSP.

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