Auto & General Insurance has been hit with a landmark lawsuit over a contractual term alleged to have helped it unfairly refuse to pay consumer claims.
In a case filed in the Federal Court on Tuesday, the Australian Securities and Investments Commission accuses the firm of breaching the law through its home and contents insurance contracts.
A condition in place since April 2021 that customers notify Auto & General “if anything changes about your home or contents” was unfair as it imposed an impractical, unclear obligation that was impossible to meet, the financial watchdog said.
“ASIC is concerned that the broad notification obligation in these contracts is unfair because it is unclear what policy holders are required to do to comply with such a broad obligation, and it is also unclear what their rights are when making a claim,” ASIC deputy chair Sarah Court said.
The term suggested the company had a broader right to refuse claims or reduce payouts than was allowable under law, and could confuse customers about their actual rights, ASIC alleged.
Tweet from @asicmedia
The term created a “significant imbalance” between the rights of Auto & General and its customers, was not reasonably necessary, and would cause determent to individuals, it said.
“Contract terms need to be proportionate, transparent and clear so any obligations are easily understood and able to be realistically adhered to by customers,” Ms Court said.
“They must accurately describe the actual rights and responsibilities of the parties under the contract.”
ASIC is seeking court declarations the term is void as well as orders forcing the firm to reassess any refused claims and injunctions barring it from relying on this term in the future.
The allegedly unfair terms appear on contracts offered through Budget Direct, Australia Post, ING, Catch, Virgin and Qantas.
This is the first lawsuit against an insurance company over allegedly unfair terms in a contract.
An Auto & General representative noted the proceedings, saying the firm had co-operated during the financial watchdog’s investigation.
“We are reviewing ASIC’s claims and are committed to working constructively with ASIC through the court process,” the representative said.
The insurer told AAP it had not refused or reduced claims based on the allegedly unfair term since September 15, 2020.
Five consumers were adversely impacted by the term prior to that date, the representative said.
-AAP
