Insurance claims: you must prove your loss, says Ombudsman

4 March 2019

24 years of insurance complaints reveal many people are still in the dark about what they need to do to make a claim.

“The best time to think about insurance is before you need it. Simple things can make all the difference to whether or not you’re covered,” says Insurance & Financial Services Ombudsman Karen Stevens. “For example, check your policy, understand limits and exclusions, keep receipts, take photos, get valuations, record damage, take reasonable care, and keep valuable items safe.”

A prima facie claim is what the insured must prove in the first instance to make a claim, and 20% of general insurance complaints involve declined claims because the insured can’t prove: 

  • Their ownership
  • Their loss
  • The value of the loss
  • That the loss was caused by something sudden and unexpected
  • That the loss is covered by the policy.

“We hear from a lot of unhappy people, who are surprised to learn that it’s up to them - not the insurer - to provide evidence to prove their ownership, their loss, and the sudden and unexpected cause of the loss,” says Karen. “It’s ideal to understand this before you might have to make a claim.”

2017 Case study
The stuck water pump: Proving the loss, and the cause of the loss
See the full case study
In December 2016, Tom* and Sue* made a house insurance claim for a broken water pump and bore. The insurer asked for a repair report to show why the bore had stopped pumping water. But Tom and Sue said the pump was stuck 35 metres underground and couldn’t be retrieved. The insurer declined the claim on the basis a prima facie claim hadn’t been established for loss or damage to the pump and bore. Tom and Sue said it was impossible to show what happened to the pump, because it was stuck in the bore. They complained to the IFSO Scheme. 

Under the policy, Tom and Sue had to show the damage was both sudden and unexpected. Although the pump was not accessible, they hadn’t been able to provide any information about why the pump and bore stopped pumping water. The insurer was entitled to decline the claim.

2018 Case study
Car down a bank: Proving the damage was caused by an accident
See the full case study
Dave* phoned his insurer to report his car was missing from his rural home. Dave said he’d noticed the keys were missing from the kitchen table and phoned the police. Later that day, Dave phoned his insurer again to confirm the police had found the car down a bank not far from his house. He made a claim for the damage. 

The insurer didn’t believe Dave. It believed he’d pushed the car down the bank, in the hope it would not be found within 10 days and, therefore, would trigger a full agreed value payment of $30,000. The insurer declined the claim on the basis the damage was not “accidental”, and that Dave had breached his duty of utmost good faith. Rather than alleging fraud, the insurer said Dave hadn’t established a prima facie claim. The insurer cancelled the policy, and Dave complained to the IFSO Scheme.

In order to prove the prima facie claim, Dave had to show the damage was “accidental”. The insurer relied on a body of circumstantial evidence to decline the claim and support its conclusion that Dave had pushed the car down the bank.

However, the IFSO Scheme case manager said there was no direct evidence to support a finding that Dave pushed the car down the bank. The insurer hadn’t assessed the vehicle or its value.

As the insurer hadn’t provided sufficient evidence to support such a serious allegation, the case manager found it was not entitled to decline the claim. The case manager also found the obligation was on Dave to prove that the damage was a direct result of the car going down the bank, and that the insurer would be entitled to assess any other damage in accordance with the policy.
 
After the complaint, the insurer assessed the car, which showed substantial mechanical damage. The insurer asked Dave to show the mechanical damage was caused by the accident. Dave couldn’t prove this, so the insurer only paid for the panel damage, which Dave could demonstrate was caused by the accident.

2014 Case study
$56K worth of jewellery: Keep receipts and valuations. Photos are often not enough
See the full case study
Catherine’s* only evidence of her stolen jewellery were photos of herself wearing it at a party.  She commissioned a post-loss report, which valued the jewellery at $56,887.
The onus rests on the insured to establish they have suffered a loss, which is covered by the policy, and to prove the value of any loss – this is the prima facie claim. With valuable jewellery, an insurer will often require purchase receipts, or a recent valuation, to establish proof of ownership and the value of the loss. Because Catherine hadn’t provided sufficient proof of ownership or value, the insurer had the discretion to decide. The insurer offered $27,846 to settle the claim.

*Not real names

See our information sheet: proving your loss

See our information sheet: jewellery

See: www.ifso.nz

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