What are your rights if your insurance claim has been rejected?

We take out insurance to cover us if the worst happens.

And if the worst happens, you hope that your insurer will support you through the tough times until you get back on your feet. Unfortunately, that doesn’t always happen.

If your insurer has turned their back on you, if your claim has been rejected, or if there is a dispute over how much you are covered for, you have rights and there are steps that you can take to protect them.

The devil in the detail  

Very few of us ever read the fine print in an insurance contract, and it’s usually only when you make a claim that you learn of some potentially nasty details. And to make matters more difficult, the fine print can change significantly between policies and insurers.

For example, consumer watchdog Choice recently studied the definition of “fire cover” in 26 different insurance policies and found that there is no standard term and, worryingly, that the term is often open to interpretation.

It seems unthinkable that you wouldn’t be covered if your house has been lost due to bushfire but some policies will ask you to establish where the fire came from, and whether the property or the contents were actually damaged by fire, as opposed to melting, ash or smoke damage.

One major insurer was even found to exclude damage caused by "heat, ash, soot and smoke when your home or contents have not caught on fire unless it is caused by a burning building within 10 metres of the insured address”.

A further issue can be establishing the value of your contents. Chances are, if your home is destroyed, you have lost all receipts and records of items and furniture collected over a lifetime.

So, what can you do?

The important thing to remember is that the insurer’s decision is not final. In our experience, insurers often rely on people not fighting back when their claim is rejected.

The first thing you can do is ask the insurer to review its decision. It is well within your rights to ask for them to undertake an “internal review”. If possible, we recommend you provide any additional evidence and/or arguments to support your claim.

If your claim is again rejected or the amount the insurer agrees to pay remains in dispute, you can then seek review by the Australian Financial Complaints Authority (AFCA) or through the Courts.

With many definitions of what constitutes fire damage open to interpretation, it may be possible to argue that the insurer’s interpretation of a clause in the policy is unreasonable.  

The law is also clear that insurers cannot rely on unusual terms in an insurance policy, unless the insurer clearly informed you in writing of the effect of that provision before you signed the contract.   

Seek legal advice on your options

If you find yourself suddenly facing some nasty fine print or the insurer fails to properly quantify your claimed loss, get some advice. Your rights are worth fighting for.

AFCA have set up a bushfire hotline where you can get some initial advice and ask questions about your rights, which is available to both individuals and small businesses. Call them for support on 1800 337 444 or click here.  

In addition, Maurice Blackburn will check your insurance cover and entitlements for free so that you know where you stand. If you get push back from an insurer when you should have cover, we can take your case on and fight for you. Call us on 1800 311 968 or send us an email.

RELATED LEGAL SERVICES: Insurance claims

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Katherine Bedford

Maurice Blackburn Melbourne
Kathy Bedford is an Associate in Maurice Blackburn’s superannuation and insurance practice in Melbourne. After a successful career as a broadcaster and nurse, Kathy completed her Bachelor of Laws with Honours at Deakin University in 2014, where she was the top student. Kathy brings ...

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