Our client is a family security company who run out of a small suburban office. There was a water leak which caused damage to the cabinetry, ceiling, carpets and a few contents. They had a Business Pack policy with a sublimit of $30,000 for stock and contents.
The Insurer appointed a loss assessor to inspect the damage and meet with the client. After inspecting the damage and speaking with our client, they formed the opinion our client had stock and contents worth $210,000 and applied the underinsurance clause to their settlement. This reduced the amount of settlement down to a fraction of the loss.
We knew the application of underinsurance wasn’t correct and escalated the issue to the Insurer’s claims team. Apart from it being quite unusual to see under insurance applied this way, the Insurer had not provided a clear breakdown of their calculation nor a copy of the loss assessor’s report they based this on. All we knew was that the adjusted believed the client has $150,000 worth of IT equipment which pushed up the sum insured.
Unfortunately even after being escalated for review, the under insurance application was upheld by both areas within the Insurer based on the loss assessor’s report.
We reviewed the very brief report and also spoke with the client in detail to determine exactly how the loss assessor could have come up with this figure. We learned the client had mentioned to the loss assessor that their customer revenue was $100,000+ via back to base monitoring (online system) and their office only had two computers, a safe and some general contents. It appeared the loss assessor interpreted this to be $150,000 worth of actual IT equipment.
We escalated this claim to a higher level within claims area, making sure they understood the true facts, primarily that their loss assessor’s report contained incorrect information and any decision made on its content was also incorrect.
After review, the Insurer confirmed underinsurance had been incorrectly applied and paid the claim in full.
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