A woman who owes more than $40,000 on a scrapped car has won a dispute and compensation after the ombudsman ruled that her insurer gave inadequate and inadequate advice on the cost of insurance when starting her policy.
The woman’s decision to opt for cash-flow insurance that was only 56% of the car’s $48,000 purchase price was “absurd,” the Australian Financial Complaints Authority (AFCA) said. The RAC must explain the implications and risks of downgrading a new car for less than the loan amount.
“It should be clear to the insurance agent that this would be a breach of many financial contracts. Little by little the agent should deal with all the losses of the policy and that the plaintiff may be left with a large debt and no car,” said the decision.
“The incorrect instructions at the start of the procedure no doubt contributed to the anxiety the claimant experienced following the accident.” That concern would have been exacerbated when the insurance company refused a new replacement car.
“The plaintiff’s reasoning was that he no longer had a car but owed a lot to a lender.”
RAC’s decision to park his car after an accident in October and immediately send $27,160 to his financier a few weeks later – the agreed amount was the insurance – left the insurer $30,000 better off than it would have been with a new car in the place he wanted and the policy promised. This was “hard to ignore,” AFCA said.
The RAC said it could not find the same car in WA and relied on the statement that “if a new replacement car is not available in WA we can pay the agreed price for your car”.
However, the woman made two Car Purchase Agreements – $57,508 and $56,056 – and she herself paid $2000 in down payments. The RAC said the car must have been lost, confirming its original opinion when it complained.
AFCA did not accept the RAC’s claim that no vehicle was available.
“A vehicle may be available for purchase in WA without the vehicle being in WA and available for immediate delivery,” it said. “I don’t think the value of the new car was made to depend on the part of the state border that the car was found on each day.”
One section of the law promised that “if we declare your car lost and it’s less than two years after it was first registered, and you’re the first registered owner… we’ll replace it with a new car… just like your car.” By continuing to refinance, scrapping the car and saving about $10,000 in salvage, the RAC show was about $16,000.
“It is difficult to ignore that under this section, the insurance exposure was high, about $46,000,” the ombudsman said.
“I question the validity of the insurance to continue to write the car and sell it for salvage. The car was repairable. It was a ‘total loss’ due to the lack of insurance.”
The AFCA ruled that the RAC must either pay the full cost of the new car, or provide a new car and the driver refund the $27,160 he paid.
The RAC could not confirm that no replacement car had been found, it said, with emails between the RAC and a business that sourced cars for sale from dealers “confusing and unsatisfactory as evidence”.
AFCA said it was “inconsistent” that the RAC argued on the one hand that a replacement vehicle “must be available at the time of the vehicle’s loss,” but also said the replacement vehicle “must be available for immediate purchase and delivery within WA at the time of the claim.” .
“I cannot accept any of these interpretations. It is a misunderstanding of the actual language,” the ombudsman said.
A recent determination on the same policy known as “available in WA” meant “a vehicle can be ordered and delivered to a buyer in WA during business hours even if there is a wait between ordering and delivery”.
The AFCA ruled that the RAC must provide a replacement car in accordance with the policy and provide compensation of $2000, saying the insurer paid the insurer before the women had time to “raise” their claims, and refusing to provide a replacement car “immediately created a problem”. for him since the money to repay the loan could be paid.
See full resolution Here.