Written by Andrew Sawkins
Part One – Read part two here
The recovery of property damages by general and commercial insurers is often neglected, principally as a result of the more complex factual scenarios and laws involved. The fact remains, overlook property recoveries, and you disregard a significant, reliable income stream for your business.
Ligeti Partners has a dedicated property recovery team which has handled thousands of these claims over our 45 year history. We regularly hear many novel, dubious or just plain wrong statements when pursuing recovery.
Some of the more common “myths” encountered include:
1. The product is out of warranty.
An insured purchases a new dishwasher, which has a 12 month manufacturer’s warranty. The insured purchases an extended 12 month warranty from the retailer. The dishwasher catches fire after 28 months causing property damage. The manufacturer and retailer, whilst apologetic advise “sorry but there is nothing we can do as the product is out of warranty” Heard this before?
This is not correct. The Australian Consumer Law provides the insured with consumer guarantees that the goods supplied are of acceptable quality and fit for purpose. These are strict consumer guarantees and generally speaking, if the goods fail within 10 years during normal use, the guarantees will have been breached unless the manufacturer can prove otherwise. The manufacturer/retailers warranty period has no relevance.
You have a good recovery opportunity.
2. There is no claim against the retailer as they have not been negligent.
Appreciating the insured has a recovery claim in the above circumstances, you send a demand to the retailer as the insured purchased the dishwasher from them. The retailer says they were simply the seller of the dishwasher and denies any responsibility or liability. Heard this before?
This is not correct. Under the Australian Consumer Law, you have a claim against both the manufacturer and retailer.
You have a good recovery opportunity.
3. Online purchases and unidentified manufacturers.
In this day and age, insureds regularly buy items online. It is often difficult to identify the manufacturer, supplier or brand of the product when they fail, causing damage. As these are unclear, there is no recovery potential. Heard this before?
In most cases, this is not correct. Section 147 of the Australian Consumer Law provides a person who wishes to institute a defective goods action, but does not know the manufacturer, can give written notice to the supplier requesting the manufacturer be identified. If the supplier does not respond within 30 days, they will be the deemed manufacturer of the goods. The supplier’s details can normally be obtained from the website, or from the purchase tax invoice.
With a bit of investigation, you can identify a party to seek recovery from.
You have a good recovery opportunity.
4. The manufacturer is located overseas.
As with scenario 3, the online presence suggests the manufacturer is overseas. It’s not commercially viable, or it is too difficult to pursue recovery. Heard this before?
It is extremely unusual that the supplier and manufacturer cannot be identified and do not have a presence in Australia. The Australian Consumer Law provides the entity which imports the goods into the country is the deemed manufacturer. Therefore, it does not matter if the real manufacturer is located overseas.
You have real prospects of identifying a party to pursue.
You have a good recovery opportunity.
5. As the recovering party, you need to prove the defect.
In a fire scenario, the item which caused the fire is often destroyed (in addition to the home/commercial premises). How do you prove the insured’s claim if the property is destroyed. The manufacturer/retailer will argue the insured needs to prove the exact defect in the product. Heard this before?
This is not correct. Under the Australian Consumer Law, it is for the manufacturer/supplier to show the goods were of acceptable quality, fit for purpose and contained no defect. Accordingly, the problem of the destroyed item, and the lack of evidence, shifts to the manufacturer/retailer.
You have a good recovery opportunity.
This first installment has dealt with some myths surrounding identifying recovery opportunities. Part 2, which will follow shortly, will deal with myths surrounding the quantum of your recovery claim.
The scenarios set out above are general in nature. If you wish to discuss your specific recovery claims or have any questions arising from this article, please contact Andrew Sawkins on 03 9947 4550 or Sindri Bergsson on 02 9044 3263 at Ligeti Partners.
