Across the Claims Desk

Offbeat, unusual claims that cross insurers desk‘s everyday!

SPLASH OF PAINT

Unrestrained items in the back of a vehicle can cause more damage than a collision. The claimant driver of a car had a minor collision resulting in tins of paint on the back seat moving freely around the inside of the vehicle, flipping their lids and coating the upholstery with an attractive but unwanted colour scheme. The cost of replacement of the interior resulted in the car being uneconomical to repair.

Outcome: Car written off. Claim accepted.

PLASTERED!

Dinner at home was an interesting occasion for one family when parts of the ceiling fell in on them. It seems that the glue holding the plasterboard ceilings in their older home did not have a lifetime serviceability.

When their house was built, ceilings were held in place by both screws and glue and if there was a shortage of screws, the ceiling fixing would rely on the glue, which can deteriorate over time.

Generally, unless there has been a contributing factor e.g. water ingress, these repairs tend to be excluded under ‘wear and tear’ gradual deterioration exclusions.

Outcome: Claim rejected.

UNBROKEN… BUT REPLACED ANYWAY

With the recent replacement of many hail damaged roofs in the Brisbane area, it is interesting to note that whilst many solar panels survived the impact of the hail, some had to be replaced anyway because were not fire rated.

Outcome: Claim accepted.

Underinsurance

Weather Events Demand a Closer Look

Following on from the previous article in the last edition of Brokerwise, we continue to focus on the impact of Co-Insurance or “Underinsurance” as it is more commonly known.

The importance of considering and selecting appropriate and adequate Insurance Policy Limits or sub limits of liability are paramount and should always take into account any possible ‘Underinsurance’ potential impact.

The latest weather perils that have impacted Queensland and Australia generally over the past few months highlight the need to look at various points that require consideration. These are:

  1. Current relevant Laws
  2. Replacement Material Costs
  3. Removal of Debris.

Point 1: There have now been changes to both State and Federal Laws regarding the required ‘wind rating’ of roller doors used in commercial buildings. Following the various cyclones and storms, insured clients discovered that because they had ‘old’ roller doors that didn’t comply with the new building laws, they didn’t have an adequate sum insured to pay for replacement with new ‘legally compliant’ doors.

Point 2: Both local and imported building materials have risen in cost due to demand after the various weather events. As such, insured clients have experienced first hand the impact of not ‘setting’ an adequate Sum Insured only to find that they were sometimes grossly underinsured, and as such, had claim payments and settlements considerably reduced. Consideration also needs to be given to both the a) extra time and b) extra costs related to imported materials.

Point 3: In this scenario, the Removal of Debris limit becomes applicable. As there are many buildings that still have varying degrees of asbestos sheeting or materials as part of their overall construction there is large cost associated with both the a) removal of debris (following an Insured loss) and b) the replacement of the damaged area. Further, there can be a ‘flow on’ effect where Increased Cost of Working Policy sub limits may also be required to be utilised following this kind of loss.

Your insurance broker can advise on policy coverage and adequate Limits of Liability required for your circumstances. Following your broker’s advice will result in better outcomes during the claims process.

Closing your Business?

Don’t Cancel Your Cover

The business has closed, it’s no longer trading, no more parts or products being manufactured or imported. No more installations or maintenance. No goods for sale.

So, time for retirement or a change in direction. We just need to cancel the insurance.

Well, not exactly. There is an element of insurance risk for a business once they have ceased trading. For a tradesman it would be the work they have installed and maintained which may cause an incident at a later date. An example would be a switchboard that causes a fire due to faulty wiring. The loss may cause subsequent damage to a building or worst case, death or injury. The time of loss is determined to be the occurrence date, therefore cover may have existed when the switchboard was installed but it should have still been in force when the incident occurred.

For the manufacturer of goods, their products may be discontinued but the element of risk remains if they cause damage or injury at a later date. So how long do you maintain run off cover?

Ideally, up to seven years is the industry standard. But not all businesses need cover for that long. For example, a restaurant would know within days or weeks of potential claims rather than years. Various States have their own legislation requirements and these would need to be addressed to clarify your situation.

Examples of run off cover for classes of insurance would include Public and Products Liability / Professional Indemnity / Directors & Officers Liability (Management Liability). Advice from your broker should be sought in these cases as to which basis of wording applies and any interruption to cover should be avoided so a claim won’t be jeopardised.

When a business is sold, the risk of potential future claims may be transferred to the new owner but this can’t be assumed, it would be negotiated and details of the sale would need to be reviewed with legal opinion.

The good news regarding run off cover is that it does get cheaper year after year due to decreasing exposure, subject to no claims activity. You can also negotiate a number of years up front with an insurer. This is suggested if a sale of the business occurs or retirement beckons. Be sure to get both legal and insurance advice for peace of mind. You can then close the door with confidence.

Workers Comp in QLD

Changes on the Way

With the recent election of the Labor government in Queensland, the repeal of the impairment threshold for access to common law claims arising out of workplace injuries seems imminent.

Changes to the WorkCover scheme, introduced in October 2013, meant that workers assessed with 5% impairment or less do not have access to claims for common law damages against their employers. Consequently, injured workers who do not meet the threshold are more likely to make direct claims against other parties, such as host employers, occupiers and contractors. Those parties in turn will inevitably seek indemnity and contribution from employers, where they have a right to sue under the contractual agreement between the parties.

The introduction of the threshold was intended to reduce common law claims for employers, thereby resulting in reduced workers’ compensation premiums. However, in practice, it has caused problems for employers in other areas.

Notably, in many instances, employers may be uninsured for claims by third parties because other insurance arrangements that employers have in place, such as public liability policies, may not respond to these claims.

The repeal of the impairment threshold will give back to workers the right to access common law damages against employers. This will likely reduce issues for employers regarding claims made under contract by third parties, and transfer the exposure back to WorkCover Queensland.

While the repeal of the threshold appears to be imminent, it remains to be seen whether the Labor government can or will remove the threshold retrospectively.

It is important for employers to ensure they understand their rights and obligations under the workers’ compensation regime, and are aware of how contractual agreements with third parties may impact on these rights and obligations, and what additional insurance arrangements may be required to adequately protect themselves against third party claims.

Disaster Recovery

There’s No Quick Fix

The Brisbane hailstorm event of late November 2014 led to more than 102,300 claims worth $1.08billion. The storm caused extensive damage to homes, businesses and vehicles as it ripped through the city at rush hour.

The event may have slipped from front-of-mind position for many of us but there is a stark reminder in the number of Brisbane houses still displaying tarpaulins and boarded up windows. The relative slowness of repair and recovery is testament to the storm’s severity. Even now, 3 months on, indications are that for many property owners, full recovery still has a long way to go.

The delay is not the fault of the insurers whose claims teams swung into action even before the hailstorm ice had melted. In fact, recent reports by CQIB members citywide have confirmed and applauded the speedy response by insurers to the avalanche of claims they received.

The problem is one of materials and labour – supply and demand. With so much damage and destruction following a major storm event, large numbers of tradesmen of all kinds are needed together with massive amounts of building materials.

For the owner of damaged property, the to-do list is long: finding tradesmen, obtaining quotes, scheduling repair work… all subject to availability of manpower and the necessary building supplies.

One industry provides an insight into the size of the problem – glass replacement.

O’Brien Glass reported that they have over 5000 repair customers to service and just 2 weeks after the storm had already replaced over 1900 glass panels out of an estimated total of 20,000. Adding to the O’Brien workload was the high number of older “Queenslander” style homes, often with high, above the ground wooden window frames requiring multiple glass panels, many of them unusual or colored glass not readily available and difficult to source.

Building industry trades of all descriptions experienced similar manpower and materials shortages. Motor vehicle insurers brought in interstate assessors to help handle the workload and one tow-truck operator collected over 600 storm-wrecked cars before Christmas.

It’s expected that owners of the more seriously damaged buildings may be waiting up to 18 months before they can re-occupy their premises.

Whether you escaped the November 2014 storm event or your property received major or minor damage, there’s no doubt the best defence is to have adequate insurance.

Review your policy to be sure the cover meets your expectations and the sums insured are enough to make things right if your property is in its path when the next storm hits.

The Cloud

What is it? Where is it?

In the simplest terms, ‘cloud computing’ means storing and accessing data and programs over the Internet instead of on and from your computer’s hard drive. ‘The cloud’ is just a metaphor for the Internet. There is no real, puffy white cloud involved; it’s just a 3rd party service provider’s server, somewhere.

When you store data on or run programs from your computer’s hard drive, that’s called local storage and computing. Everything you need is physically close to you, which means accessing your data is fast and easy (for that one computer, or others on the local network). Working off your hard drive is how the computer industry functioned for decades and some argue it’s still superior to cloud computing.

The cloud though, is not about the hard drive in your desktop computer or hard drive server in residence.

To use the cloud you need to access your data or your programs over the Internet or at least have that data synchronised with other information over the Internet. With an online connection cloud computing can be done anywhere and at anytime on smartphones, pads or tablets as well as desktop computers.

The serious business, and where the money is, is in the cloud-based software programs. These include ‘Software as a Service’ (SaaS) where businesses can subscribe to an application over the Internet (examples: Adobe Creative Cloud, Salesforce.com). There’s also ‘Platform as a Service’ (PaaS) where business can create its own custom applications for use by all in the company. And of course the major players who offer ‘Infrastructure as a Service’ (IaaS) where companies like Google and Amazon provide the backbone that can be rented out by other companies as a platform for their services; Netflix being one, a customer of Amazon cloud services and due to launch in Australia in March this year.

Cloud computing is big business. Global management consulting firm, McKinsey & Company claims that 80% of the largest companies in North America that it surveyed are either looking at using cloud services – or already are.

The cloud in its many forms is an exciting development but it also creates new types of challenges in protecting sensitive information assets. A business-focused risk-management approach enables companies to strike the right balance between protecting data and taking advantage of more efficient and flexible technology environments.

The cost of Terrorism. How is it funded?

As a result of the Lindt café hostage siege in Sydney that ended in tragic circumstances, the Federal Government has now determined the actions of the gunman was a terrorist act.

This declaration was a key point for the insurance industry as the Terrorism Insurance Scheme that was created following the Terrorism Act 2003 can now fund claim settlements. The scheme is administered by the Australian Reinsurance Pool Corporation and provides a pool of money to minimise the impacts that flowed from the withdrawal of terrorism insurance. This standard exclusion introduced to policies was necessitated by the anticipated huge costs, estimated at $20 billion, in the wake of the terrorist attacks on New York’s Twin Towers on September 11, 2001.

The Terrorism Insurance Scheme provides cover for commercial property and associated business interruption and public liability claims. It does not cover residential property or residential property contents; also excluded are myriad other types of insurance too extensive to list here.

The scheme is funded by a percentage of premium contributions paid into the reinsurance pool to ensure there are adequate funds to pay for large-scale loss that may affect property and subsequent loss of income. The scheme was established as an interim measure and is formally reviewed every three years in order to decide if there is a need to continue. The latest review in 2012 decided that in the context of levels of Australian and International terrorism at the time, the scheme would continue.

The risk assessment and relevant premium payable by commercial enterprises is determined by postcode with inner city properties attracting a different rate to regional properties. The applicable rate is calculated from the property section of the policy and is a percentage of the existing premium – rather than a loading.

The Sydney café siege, from an insurance perspective, resulted in loss of income to many businesses that had to be evacuated due to the safety risk.

The Insurers facilitate the claims and pay as if the Terrorism exclusion did not apply; they then send the applicable amount for reimbursement via the Terrorism funding pool.

It is important to point out that claims are settled by insurers in accordance with the risks listed in your policy. The declaration of a Terrorism Act merely allows insurers to seek reimbursement from the pool.

Thankfully in the Lindt case, most surrounding business affected did not suffer any loss or damage to property but may have incurred loss of income and/or increased costs due to lost working time as a result of prevention of access to their place of business.

To be able to claim the business interruption financial loss, it is necessary for those businesses to have a policy that covers such financial losses. If you don’t have a policy then you are not able to receive any compensation.

Talk to your broker and make sure you have adequate coverage should you be faced with a similar claim.

Higher Excess can mean Lower Premiums. Not always a good move.

Most insurers will allow you to increase your excess to reduce your premium. Why? Because when you increase your excess it shifts some risk from the insurer back to you. It represents a saving for insurers, as they no longer have to pay out numerous small claims.

Often people see a higher excess as one of the most effective ways to save on insurance costs but it may not be the wisest option. The reality is that when you do make a claim, you will have to pay more towards it. And in the event of multiple claims, the total can skyrocket.

Consider this scenario: Jordan and Annabelle opted to increase their excesses to reduce their premiums last year. They had 2 cars comprehensively insured through ABC Insurance as well as their home and contents. For the cars, the standard excess was $600 but they opted to increase it to $1000. In addition, they increased their home and contents standard excess of $250 to $1250. The total premium saving for the year was $670. That’s great news! Or is it?

A serious hailstorm came along that hit their home and both their cars. Claims lodged for both vehicles and home were met with an excess bill of $3250. If they had retained the standard excesses they would only have to contribute $1450. So the premium saving of $670 left them out of pocket by $1800 at claim time.

Choose a level of excess you can afford and take the time to review your insurance schedule and policy wordings to see if you can bear the costs of excess contribution. Also, be aware that some insurers have different types of excesses that may apply in different situations or apply concurrently. Contact your insurance broker if you have any doubts or questions.

Steadfast Video

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Pre-existing injury disclosure…employers can ask

Late last year the Queensland government made some significant changes to the Workers’ Compensation and Rehabilitation Act 2003. One particular change that employers should be aware of is that employers may now ask a prospective employee to disclose any pre-existing injury or medical condition that they believe or should suspect would be aggravated by the duties of the position applied for.

Further, the employer is entitled to access a prospective employee’s claims history. The request must be in writing and the prospective employer needs to provide the prospective employee with information about the nature of the duties involved in the job. They also need to advise the prospective employee that if they do not comply with the request, or supply false or misleading information, they will not be entitled to compensation or damages under the Workers’ Compensation and Rehabilitation Act 2003 for any event that aggravates the non-disclosed pre-existing injury.

The prospective employer may also apply to the Workers’ Compensation Regulator for a copy of the prospective worker’s claims history. The application needs to be in the prescribed form and requires the prospective employee’s consent. This information can only be used by the prospective employer for the purpose of considering that person’s application for employment.

Whilst these changes will definitely be beneficial to employers, employers need to be mindful that they still need to comply with discrimination laws and the Fair Work Act 2009 (Cth) when considering a prospective employee’s application for employment. If a prospective employee discloses a pre-existing injury and they can establish that the employer has discriminated against them based on their knowledge of that pre-existing injury the employer may be liable to pay compensation.

Employers will also need to take account of a possible increased exposure to negligence claims in circumstances where the employee has made disclosure of pre-existing injuries or conditions. If an employer has knowledge that the employee suffers from a pre-existing injury this may give rise to a special or higher duty of care to that employee than it would otherwise owe as a result of being furnished with that knowledge.

Before making any changes to their employment practices based on these changes it is recommended that expert advice be sought regarding the above matters.