General insurer Youi Pty Ltd is found to have breached its duty of utmost good faith, under the Insurance Contracts Act, in the Federal Court case initiated by the Australian Securities & Investments Commission (ASIC).
Chief Justice Allsop ruled that Youi breached requirements of the Act on five occasions. The judgement seen by Insurance Business noted that from May 19, 2017 to in or about late December 2017 or January 2018, the insurer failed to take reasonable steps to inform the policyholder that the contractor it proposed to carry out repairs to the insured’s property had been the subject of numerous complaints in respect of delays and the quality of its work.
It was also found that reasonable steps were not taken to inform the insured that ProBuild Australia Pty Ltd (PA) was not a repairer acceptable to Youi and/or a repairer from its network of recommended repairers for the policy’s purposes; afford the claimant an opportunity to request the appointment of another repairer; and seek to terminate the engagement of PA.
“From May 24, 2017 to on or about September 29, 2017,” the court’s decision went on to read, “Youi failed to take reasonable steps to ensure that any builder commenced the repairs to the property; from on or about October 04, 2017 to at least November 15, 2017, Youi failed to take reasonable steps to effect make safe works to the property;
“from November 02, 2017 to at least May 18, 2018, Youi failed to take reasonable steps to consider and respond to the formal complaint made by the insured on November 02, 2017; and from February 20, 2018 to April 05, 2018, Youi failed to take reasonable steps to respond to the email the insured sent to Youi on February 20, 2018 thereby further delaying the completion of the repairs.”
The policyholder made a claim in January 2017 following a severe hailstorm in Broken Hill the previous year. Repairs were not completed until November 2018.
Meanwhile it was also ruled that declaratory relief is appropriate, and that ASIC – which commenced the proceedings in April – is the appropriate party to seek declarations as the statutory regulator.
In a statement, ASIC explained: “At the time the conduct occurred, the Insurance Contracts Act did not impose pecuniary penalties for a breach of the duty of utmost good faith. ASIC therefore sought only declarations that Youi breached the duty. Breaches of the duty of utmost good faith occurring from March 13, 2019 may now also carry pecuniary penalties.”
An insurance case study within the Financial Services Royal Commission Volume 2 Final Report, Youi was referred by Commissioner Hayne to the regulator. The Financial Sector Reform (Hayne Royal Commission Response) Bill 2020, meanwhile, was introduced into Parliament earlier this month.
“ASIC expects those involved in handling insurance claims to act consistently with the commercial standards of decency and fairness, ensuring claims are handled in a fair, transparent, and timely manner,” said ASIC Commissioner Sean Hughes.
“The value of an insurance policy is in the promise – so that a consumer can feel confident and secure that they will be looked after when something goes wrong. The community expects their insurer to be there when something does go wrong, to be treated fairly and with dignity and respect.”