Why it is important to ensure your release states "In full and final settlement"

Determination

Case No: 382250 Determination Page 1 of 5

Case number: 382250 11 December 2015

1 Overview

1.1 Dispute

The Applicant‟s home building was damaged by vandals and he lodged an insurance

claim with the Financial Services Provider (FSP).

The FSP initially denied liability for the damage. However, upon review, it agreed to

cover some of the damage to the building, and provided a cash settlement to the

Applicant.

The Applicant now seeks to have the remaining damage covered by the FSP. He

also seeks payment for loss of rent suffered.

The Case Manager provided the parties with a Recommendation on the issues in

dispute. The Recommendation was in favour of the FSP. A copy of the

Recommendation is attached to this Determination.

1.2 Issues and Key findings

Were the findings of the Recommendation correct?

The findings contained in the Recommendation were correct and are adopted in this

Determination. Further submissions provided after the Recommendation have been

considered.

Has the FSP any further liability for the damage to the building?

The FSP does not have any further liability for the damage to the Applicant‟s home

because the Applicant signed a binding agreement, accepting the FSP‟s payment of

$13,000 as full and final settlement for the claim for damage.

Is the Applicant entitled to loss of rent?

The Applicant is not entitled to payment for loss of rent. The failure to alert the FSP to

the claim meant the FSP was prejudiced to the full extent of any loss of rent claim.

1.3 Determination

This Determination is in favour of the FSP.

The FSP is not required to take any further action with respect to this claim.


2 Reasons for Determination

2.1 Were the findings in the Recommendation correct?

The Recommendation was correct

I have determined this dispute, considering what is fair in all the circumstances,

having regard to the relevant law, good industry practice, codes of practice and

previous FOS decisions. I have taken into account all the material submitted by the

parties, both before and after the Recommendation. I am satisfied that the

documentation I have relied on has been provided to both parties.

I am satisfied that the case manager‟s Recommendation contains an accurate

summary of the dispute, the issues to be determined, any applicable paragraphs of

the Terms of Reference and any relevant law.

The discharge agreement was in full settlement of the claim for damage

The Discharge Agreement stated the settlement was in full and final settlement of the

claim. The claim was not defined but referred to damage that occurred on 29 August

2011.

I agree with the Recommendation that there is no evidence to indicate the Applicant

requested, or the FSP agreed, that the $13,000 settlement payment was anything

other than full and final settlement of the claim. The Applicant is therefore not entitled

to the additional $11,538.85 he seeks for damage to the property.

In reaching this conclusion I have also considered the additional material produced

by the FSP after the Recommendation which includes:

Correspondence regarding the settlement, and

The claim notes.

These documents confirm the Applicant was aware of a $24,000 repair figure (which

he has previously acknowledged) but nevertheless chose to accept $13,000 in full

and final settlement of the claim for glass breakage and graffiti. The documents do

not provide any substantiation for the Applicant‟s submission that the $13,000 was to

“get things started”.

The documents provided do show that the Applicant was pursuing the loss of rent

claim and the FSP was aware of this.

The Applicant’s actions meant the loss of rent claim was deferred

Under the policy, a claim for loss of rent ceases when the Applicant receives a

payment for the damage. Consistently with this, the Applicant seeks loss of rent for 2

September 2012 to 30 November 2013 (when the settlement sum was paid), being

65 weeks @150 per week = $9750. However, the policy covers a maximum of 52

weeks loss of rent.

As a result of the vandalism, the house was boarded up. Further, the Applicant says

the hot water unit was stolen. The home was therefore uninhabitable. However, given


the tenant was using the home for storage rather than residency, she was able to

continue storing her furniture and therefore paid rent.

This meant that any loss of rent during the period of repair was deferred until she

removed her furniture at the end of the tenancy in August 2012.

The failure to notify the FSP of the claim prejudiced the FSP

The Applicant was obliged to immediately notify the FSP of any claim. The Applicant

did not do so for 12 months.

Under the terms of the policy loss of rent is payable for either:

the period of time the repairs would have taken (which the Applicant said would

be one month or $600)

until the FSP paid the Applicant for the repairs, or

the home becomes habitable.

The FSP could have been in a position to pay for the repairs prior to the rental

arrangement ending, had the Applicant notified the FSP of the loss within a

reasonable time. In this instance, there would be no loss of rent claim. The failure to

notify the FSP therefore prejudiced it.

Further, as the Applicant was not residing at the premises, it may have been possible

for the repairs to have been carried out while permitting the tenant to continue

storage of her goods (and therefore continuing to pay rent). By not alerting the FSP

of the claim during the tenancy, the FSP was not able to make this assessment and

mitigate any loss of rent claim.

The Applicant explained that there was only one set of keys, the tenant was difficult

to contact, the tenant had furniture stored in every room making it difficult to access,

and he wanted to find out the details of the incident before contacting the FSP.

However, this does not excuse the year‟s delay.

In reaching this conclusion I have considered the Applicant‟s submission that he had

an obligation to his tenant and would not evict her so that an assessment could

occur. Further, the tenant had personal and private rights. However, there is no

evidence that an eviction was required for an assessment. There is also no evidence

that an eviction was required for the repairs to the glass and graffiti – the failure to

obtain an assessment meant that such evidence was not obtained.

Finally, I note that eight months of this loss of rent occurred during the period when

the FSP had denied the claim, and prior to the Applicant responding. This inaction

also prejudiced the FSP.

Accordingly, the FSP is not required to make any further payment in respect of either

the damage to the property or for loss of rent.

Both parties are responsible for the delay

The Applicant is dissatisfied with the length of time it took for his claim to progress.

Having reviewed the material available, it appears both parties were responsible for

this delay. As such, it is not appropriate to award an amount for non-financial loss.


3 Supporting information

3.1 Chronology

Date Event

29 August 2011

Applicant‟s rental premises was maliciously damaged

Tenant was not living at the premises but had her goods

stored there (collectible furniture)

Tenant continued to pay rent to the Applicant

Tenant had the only keys to the property, had items in every

room in the premises. The place had been boarded up

following the damage. She was difficult to contact.

July / August 2012 Applicant removed her goods.

27 August 2012 Applicant lodged a claim on his policy

18 September 2012 FSP obtained assessment for repairs in the amount of

$24,538.85.

A copy of the quote was not provided, but the Applicant

acknowledged to FOS that he had been informed of the

figure.

18 October 2012 FSP denied the claim on the basis the home was left

unoccupied for more than 60 days before the date of the

alleged damage. Also denied on the basis the premises was

boarded up when the damage occurred (Applicant explains it

was boarded up as a result of malicious damage)

5 June 2013 Applicant contacted the FSP to dispute the denial.

22 October 2013 FSP offered $13,000 for glass breakage and damage caused

by graffiti only. The FSP says this offer was made in full and

final settlement of the vandalism claim.

2 December 2013 Parties enter a discharge agreement, where the Applicant

accepted $13,000 in full and final settlement of the vandalism

claim.

Applicant says he accepted this in order to “get things

started” but has pursued the shortfall ever since.

6 December 2013 Settlement sum of $13,000 paid to Applicant

19 December 2013 Applicant sought compensation for loss of rent.

12 February 2014 Applicant states he was entitled to more in respect of the

claim for damage to the home building.

21 February 2014 FSP explained that $13,000 was offered on the basis this

represented the cost to repair damage that could reasonably

have been committed by vandals. The remainder of the


Date Event

damage was not.

Recommendation

Case No: 382250 Recommendation Page 1 of 4

Case number: 382250 2 September 2015

4 Overview

4.1 Dispute

The Applicant‟s home building was damaged by vandals and he lodged an insurance

claim with the Financial Services Provider (FSP).

The FSP initially denied liability for the damage. However, upon review, it agreed to

cover some of the damage to the building, and provided a cash settlement to the

Applicant.

The Applicant now seeks to have the remaining damage covered by the FSP. He

also seeks payment for loss of rent suffered.

4.2 Issues and key findings

Has the FSP any further liability for the damage to the building?

The FSP does not have any further liability for the damage to the Applicant‟s home

because the Applicant signed a binding agreement, accepting the FSP‟s payment of

$13,000 as full and final settlement for the claim for damage.

Is the Applicant entitled to loss of rent?

The Applicant is not entitled to payment for loss of rent because:

the Applicant received rental income from the tenant of the property for a further

12 months after the damage event.

loss of rent benefit of the policy comes to an end when the FSP repairs the

damage or pays the insured to do so

by delaying lodgment of the claim by nearly 12 months after the damage event,

the FSP‟s ability to resolve the damage claim (and so prevent loss of rent being

triggered) was prejudiced.

4.3 Recommendation

This Recommendation is in favour of the FSP.

The FSP is not required to take any further action with respect to this claim.


5 Reasons for Recommendation

5.1 Has the FSP any further liability for the damage to the building?

Agreement signed accepting $13,000 in full and final settlement of claim

There is no dispute the Applicant‟s property was vandalised on or about 29 August

2011.

The FSP‟s assessor “C” obtained a quotation from builder “M” for the repair of the

damage to the building, in the amount of $24,538.85. However, C reported various

issues with the claim, including:

the premises were old, run down and in poor condition

not all of the damage was caused by the August 2011 event.

The FSP initially denied liability for the damage on the basis the home was

unoccupied for more than 60 days prior to the damage event, contrary to policy

conditions.

The Applicant later disputed the FSP‟s decision. Upon review, the FSP agreed to

cover glass breakage and graffiti damage, and offered an amount of $13,000 to the

Applicant.

The FSP provided to the Service a copy of a discharge agreement, showing on 2

December 2013, the Applicant and his wife (the co-insured) signed their acceptance

of the amount offered by the FSP. This was in full and final settlement of the claim for

damage to the building. The settlement payment was made by the FSP on 6

December 2013.

The Applicant says although he was verbally advised of the repair cost, he was not

provided a copy of the quotation from builder M prior to agreeing to the FSP‟s

settlement offer. The FSP confirmed this to be correct, however it notes there is no

indication the Applicant asked to be provided with M‟s quotation.

Although the Applicant argued the amount paid by the FSP was just to get things

started, he has not provided any evidence supporting this was the case. Further, the

Applicant‟s position in this regard is not consistent with the wording of the agreement,

which clearly indicates the payment was in full and final settlement of the damage

claim.

In any event, there is no evidence showing the FSP pressured the Applicant to sign

the discharge agreement. Accordingly, there is no valid reason why the Applicant

should not be bound by the agreement he signed.


5.2 Is the Applicant entitled to loss of rent?

Applicant received rental income from tenant for 12 months after damage event

The FSP indicated the Applicant continued receiving rent from his tenant for

approximately a year after the August 2011 event, which resulted in the claimed

damage.

The Applicant therefore suffered no loss of rent during this period.

Loss of rent benefit ends when the FSP settles damage claim

The policy provides for loss of rent benefit to be paid in circumstances where the

FSP pays (or agrees to pay) a claim for damage to the insured home, for as long as

the home is uninhabitable as a direct result of the damage.

The loss of rent benefit stops once the FSP repairs the damage, or pays the

Applicant for the repairs.

FSP prejudiced by the delay in claim lodgement

It is not in dispute the Applicant lodged the claim on 27 August 2012, almost a year

after the vandalism event, which caused the damage to his property.

If the Applicant fulfilled the policy requirement to advise the FSP immediately of the

damage claim, the FSP might have been able to resolve that claim (either by

agreeing to repair the vandalism damage or pay the Applicant to do so) at a much

earlier stage.

However, the delay in claim lodgement meant the FSP was not given the opportunity

to assess and finalise the damage claim before the rental payments from the tenant

ceased. The FSP‟s interests have therefore been prejudiced by the Applicant‟s delay.

Accordingly, the FSP is not required to make any loss of rent payments to the

Applicant.


6 Supporting information

6.1 Policy provisions

“General conditions applying to all policies … What You must and must not do if You make a claim or an event happens that might lead to You making a claim You must: … immediately tell Us about the claim or the event and send Us written details when We require this … … Additional benefits … Temporary accommodation or loss of rent If We have paid or agreed to pay a claim for damage to Your Home (other than under the additional benefit „Flood cover‟ in this policy), We pay: … the rental income You lose if at some time during the 60 days prior to the date on which the damage occurred Your Home was occupied by a tenant, for as long as Your Home is uninhabitable as a direct result of the damage. We pay up to $30,000 towards the cost of 52 weeks rental costs or 52 weeks loss of rent. We stop paying for alternative rental accommodation and loss of rent once We replace, reinstate or repair the damage to Your Home or pay You to do so, or Your Home becomes habitable.”

6.2 Discharge agreement

Extract from discharge agreement signed by Applicant on 2 Dec 2013

“We … are the owner(s) of property at [address], which was damaged as a result of an incident which occurred on the 29 August 2011.

…

Upon payment to us of the sum of $13,000 by [acronym] a trading name of [FSP] we will accept such sum in full and final settlement of our claim on the Policy. ” [sic]

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Why it is important to ensure your release states "In full and final settlement"