Blog Question: claim money to wrong bank account
I have a client who had a legitimate claim paid by the insurer however, when asked for bank account details to deposit the claim settlement into the clients account the client made a mistake with one number in the bank account number. Subsequently the money was paid into an incorrect account. Our client has therefore never received payment.
I’m wondering if you have heard of this happening before and if you have any thoughts on who needs to take responsibility.
- Has the insurer fulfilled their obligations in paying the claim if the insured has never received payment?
- The bank told the insurer they have been unsuccessful in their attempts to recover the money from the lucky customer who did receive the money into their account but say they cannot disclose the customers details due to Privacy Act provisions. Can they merely wipe their hands of the matter?
- Does our client have to cop the loss because they made the mistake by providing a wrong bank account number?
An interesting one. Hoping you can provide some guidance.
Ian [Surname and email provided]
I rang Ian for more details and it is one of those claims where it is a comedy of errors. There were in fact two claims and both insurers drew cheques which were sent to the wrong broker who appear not to have passed them on to the client, the correct broker or back to the insurer.
When the client chased the money both insurers offered to pay the money electronically but the client made a mistake with one digit on the account and both insurers paid it into the nominated account which belonged to someone else.
If this had been a cheque under the Banking Act, (1959) the insurers may have still been liable for the mistake but it is completely different with electronic banking.
If the mistake is picked up within 10 days then the problem can be reversed by the bank and the money retrieved. This is what happened with one insurer but the mistake was not picked up on the second insurer until well after the 10 days. This insurer had in fact paid their money over much earlier.
What is not clear to Ian or myself is whether the client received an email notification that this insurer had paid the money into the account. If they had the mistake may have been able to be picked up earlier.
This is really bad luck for the client as banks try hard not to have consecutive account numbers at the same branch so that they have a double check that the BSB (which stands for Bank State Branch) and the account number match. This suggests to me that it was not the last digit that was written by the Insured incorrectly but another of the numbers that makes up the account number and that this account number was at the same branch. This is quite a fluke.
The other issue is that most businesses on seeing the error would refund the money. Not all and the account holder is refusing to do so.
On my understanding of the position, by keeping the money the account holder is committing an offence and the only right of recourse is to go to the police and get them to find out who it is and contact them in the hope that the involvement of the police scares them into refunding or paying over the money to the rightful owner. Here it is not a large sum and it remains to be seen if the police will get involved.
The matter has been taken to the banking ombudsmen (Financial Services Ombudsmen) who advised that the bank had done nothing incorrect and could not be expected to make good the loss.
The insurer for their part could well argue they have paid the claim in accordance with the Insured’s written instructions and they cannot be help responsible for a mistake by the client.
I always recommend that besides the BSB and account number that the name of the account holder be shown as well and ask that an email confirmation of the remittance advice be provided so that the Insured knows when the money should hit their account and work done to reverse it within the 10 day window I mentioned before.
The amount here is not large, around $2,500 to $3,000 but this is still a lot for a small business and the broker is going to ask the insurer to take a fresh look at it as while the Insured made a mistake, it was because they were rushing as they needed the money and the cheque had been sent to the wrong place in the first place by the insurer. It will be interesting to see how this goes. Logically, I think it boils down to whether the Insurer should have issued the electronic remittance advice and if they did issue one. If they did and the Insured failed to report the money not hitting their account, I think they are in the position they now find themselves through their own actions.
It is a lesson to us all. It is vitally important that the account details like all information provided to an insurer is 100% correct. The old adage about “act in haste, repent in leisure” is very true for clients when it comes to insurance.
As always if you have a different point of view or have something to add, please leave a comment.