Policies may include fraud exclusions, ombudsman says
The Insurance & Financial Services Ombudsman Scheme (IFSO Scheme) has cautioned businesses that their insurance may not protect them against online marketplace scams.
Karen Stevens (pictured above), Insurance & Financial Services ombudsman, said many business insurance policies include fraud exclusions, which means that conventional coverage for lost or stolen items may not apply if a business falls victim to a scam.
“Things like Facebook Marketplace scams have increased in the past few years, meaning there’s a real risk to businesses if they aren’t alert and vigilant when selling items,” Stevens said.
The IFSO Scheme investigated a recent case involving “Ajay” – a pseudonym used to protect the person’s privacy – who was selling car parts on behalf of his company, including a gear box, motor, clutch, and an aluminum radiator. These items were listed on Facebook Marketplace, and a buyer agreed to purchase them for $10,000.
A few days later, the buyer claimed to have made the payment and provided a copy of a New Zealand driver's license, purportedly belonging to their partner. A woman who identified herself as the buyer’s sister collected the items from the company's premises. However, it was later discovered that no payment had been made. Ajay filed a police report and submitted an insurance claim on behalf of his company.
The insurer rejected Ajay’s claim, citing the fraud exclusion clause, which stated that “loss caused by... any... false pretense practiced on you” was not covered.
Ajay subsequently lodged a complaint with the IFSO Scheme. After reviewing the police report, which categorised the incident as “obtaining by deception (more than $1,000)” and labeled it “FB MP [Facebook Marketplace] Fraud $10,000,” the IFSO Scheme determined that there was sufficient evidence to support the claim that the items were obtained under false pretenses by the buyer and that the insurer was within its rights to deny the claim.
“This was obviously not welcome news for Ajay, but is a good reminder for businesses to be wary of scams and to make sure they’re verifying payment before handing over any items,” Stevens said.
The IFSO Scheme resolves complaints related to insurance and financial services, free of charge to consumers. Those wishing to file a complaint with the IFSO Scheme can do so through the www.ifso.nz website or by calling 0800 888 202.
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