Even though it’s human nature to focus mainly on the cost of the renewal and ignore the rest of the document, the reality is that we need to consider a lot more than the dollars and cents of the next year’s premium. I know, because I spend a lot of time with clients who say, “If only!” Sometimes people omit to mention changes in their circumstances that make all the difference between an insurance company paying, or not paying, when the worst happens.
Omission
Let’s say you buy an expensive, but portable, item of new equipment for your practice. When your contents insurance renewal paperwork arrives, because you made the purchase nearly a year ago and don’t spend much time thinking about new capital items, you forget to list it on the renewal document.
Some weeks later there is a burglary. Apart from having to deal with repairing the damage to your premises and all the disruption and trauma caused by the break in, when you put in your claim for the stolen equipment, the insurer rejects the claim. The reasoning is quite simple: the specific item was not nominated in the policy schedule. It is therefore simply not covered by the policy, or alternatively, not adequately covered.
Material non-disclosure
Then there is the case of the executive taking out critical-illness cover who omits to mention the fact that, for example, he has a pre-existing hereditary disease. Perhaps he is so used to living with the condition, or it impacts to such a small extent on his lifestyle that in the hurry to fill in the insurance application forms, he just doesn’t remember to mention it. But if he subsequently makes an insurance claim following problems related to that disease, the insurer could reject his claim on the basis that he failed to disclose to the insurer significant information that was material to whether or not the insurer would have taken on the risk in the first place. Or, if the insurer had been willing to take on the risk, it would have been for a substantially higher the premium.
Making a claim
This may all seem very black and white, but the wording of an insurance claim is extremely important. Under no circumstances should an insurer be lied to or deceived. But getting advice on what information must be included in any claim form submitted to an insurer, and how to word this information, is critically important. I have been involved in cases where significant disability claims have been paid out, while others, which seemed identical, were not. The difference in outcomes was probably caused or contributed to by the way the claim form was completed.
However, if an insurer rejects a client’s claim that’s not the end of the road. A client seeking legal help can have a letter written to the insurer demanding a full explanation of the basis of rejection of the claim.
The grounds on which the claim has been rejected may be able to be contested and other arguments raised in support of the client’s case. If the insurer still refuses to accept the claim in part or in whole, the client may then have the option to commence legal action against the insurer for breach of the insurance contract and/or on other grounds, which the insurer will be required to defend.
The value of advice
While current statistics suggest that around 70 per cent of these kinds of disputes are settled during the course of the litigation and mediation process that occurs before going to trial, given the protracted nature of the process and the potentially high legal costs associated with it, clients would be well advised to use the services of a lawyer with a fixed price fee. Doing so provides more peace of mind about costs, and also helps ensure that the momentum of the action is maintained.
Any reward for loyalty?
After years of faithfully paying their insurance premiums are clients forgiven the sin of omission? I’ve seen insurance companies reject claims by loyal clients of many years’ standing.
Whatever the policy wording, insurers do have the discretion to waive potential defences to claims made under insurance policies and nevertheless pay out the claim – but I wouldn’t count on it! Renewal notices should never be seen as a routine chore. They deserve quality time and proper consideration. The two words you never want to hear yourself say are, “If only!”
