Yes, there are businesses which deliberately derail insurance claims for profit

By Matt McDonald and Chris Forder

When a natural disaster strikes an area and damages multiple properties in a community, it is often a magnet for third party businesses looking for opportunities to turn a profit (sometimes called ‘storm chasers’).

This phenomenon follows the events that are generally covered by property insurance, such as flood, fire, storm and hail. There are several methods used by these unscrupulous operators:

  • Some masquerade as representatives of the person’s insurer, including to advertise online using an insurer’s name and suggesting you can use their contact details to make a ‘claim’. It is not until the property owner tries to contact the insurer (using real contact details) that they realise no claim has been lodged. By this time, the third parties have generally already arranged for works to be carried out at inflated prices.
  • Some purport to act as claims managers/preparers, going door to door in impacted areas and applying pressure to vulnerable (often elderly) people to sign retainers. They then impose themselves as gatekeepers and often seek to cause delay and fabricate issues, in order to maximise their own fees.
  • Some operate as remediators or repairers, with a focus on vulnerable people with home insurance. Often the ‘contract’ they pressure people to sign includes an authority for them to communicate directly with the insurer. They may also ask for the keys and take control of the property, in the hope of excluding any representatives of the insurer from interfering or ‘taking over’. They will then seek to recover their costs from the insurer, ideally without the insured’s knowledge or involvement. This business model means they can freely charge excessive costs and perform unnecessary or low-quality work without harming their future business opportunities.

These operators can have a severe impact on both insurers and insureds. It can cause significant delay in the repair of properties and the payment of claims, and it can leave the insured with an uninsured liability they never intended to incur. These operators also tend to cause great distress to the people who fall victim to their schemes.

Fortunately, there are often legal remedies that are available to insurers and their customers in such circumstances. For example:

  • The entire contract with the third party business might be unenforceable, for example because there was not sufficient certainty or clarity about the key terms.
  • Certain terms and conditions may not be applicable because they were not properly incorporated into the contract. A common example is where terms and conditions are displayed on a website, but not brought to the insured’s attention.
  • Certain terms and conditions may be rendered void by the unfair contract terms regime in sections 23-28 of the Australian Consumer Law. This may apply to certain contracts if the term is unfair. What is meant by ‘unfair’ is set out in section 24, with examples in section 25.
  • The insured may be found to have terminated the contract long before the third party business actually stopped doing work (and incurring costs) or gave up control of the property. Costs incurred after a valid termination will not be claimable.
  • The insured may have a counterclaim against the third party business for breach of contract, especially if any of the work they did was defective or unsuitable and had to be rectified or re-done. That can be used to offset any amounts payable to that business.


Matt McDonald

Matt is an experienced insurance lawyer acting for leading insurers, specialising in public and product liability.

Chris Forder

Chris is a general insurance lawyer with expertise in building & construction claims and complex indemnity disputes.

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