Customer Wins in Insurance Dispute Over Laser Equipment

The crux of the dispute arose when the salon's laser machine broke down in February, and repair costs were estimated at $18,069. The salon owner had insured the machine for $50,000 in December of the previous year, following its second-hand purchase and refurbishment in 2012 for $66,000.

Despite acknowledging the damage, QBE Insurance reduced its compensation to $7,286, citing an underinsurance clause. QBE claimed that due to the model being discontinued, a replacement would necessitate insuring at $155,000.

The insurer's clause stipulated that if the sum insured was less than 80% of the "total new replacement value," the liability could be adjusted accordingly. However, the salon owner challenged this assessment, arguing that a comparable refurbished machine was valued between $30,000 and $45,000.

The Australian Financial Complaints Authority (AFCA) intervened, siding with the salon owner. AFCA declared that policy wording began ambiguous, noting discrepancies in terms such as "full value" and "total new replacement value", creating confusion about the clause's intent.

AFCA clarified: "When the policy is read as a whole, it indicates the laser should be insured for its full value, or what it would cost to replace with a similar laser in a similar condition." They refuted QBE's expectation that the salon owner should have insured the laser for $155,000, indicating she would never recoup more than $50,000 under policy terms.

This ruling mandates QBE to cover the repair costs, less the policy’s deductible. The case emphasizes the importance of clarity in insurance contracts and equitable treatment of claims.

Published:Wednesday, 27th Nov 2024
Source: Paige Estritori

Share this news item:

Insurance News

ICA Advocates for Strata Law Reforms to Address Rising Insurance Costs in Victoria 03 Mar 2026: Paige Estritori The Insurance Council of Australia (ICA) has recently called for substantial reforms to Victoria's strata legislation, citing a direct correlation between inadequate governance and escalating insurance premiums for residents. With approximately one in five Victorians residing in strata-titled properties, the need for effective management and oversight has become increasingly critical. - read more

CHU's 2025 Report Shows Stability in Strata Insurance Premiums Amid Climate and Regulatory Shifts 03 Mar 2026: Paige Estritori CHU, Australia's leading strata insurance underwriting agency, has released its 2025 State of the Strata Market report, providing a comprehensive analysis of the current state of the industry. The report offers valuable insights into premium movements, the impact of weather events, regulatory developments, and emerging risks affecting strata insurance. - read more

PICA Group Highlights Potential Risks to Strata Industry Viability 03 Mar 2026: Paige Estritori Bobby Lehane, CEO of PICA Group, has issued a cautionary statement regarding the future of the strata management sector in Australia. He emphasized that eliminating insurance commissions could pose a significant threat to the industry's viability, drawing parallels to the challenges faced by the aged care sector. - read more

Significant Increase in Private Health Insurance Premiums Announced for 2026 03 Mar 2026: Paige Estritori Australian private health insurance premiums are set to rise by an average of 4.41% from April 2026, marking the most substantial increase since 2017. This adjustment reflects the escalating costs associated with medical and hospital services, which have risen by 5% over the past financial year. - read more