An insurer has been told to increase its settlement for an orchard fire more than seven years after the blaze.

IAG underpaid for damaged apple bins and incorrectly calculated the value of destroyed fruit, the Australian Financial Complaints Authority has found.

It must now recalculate the latter part of claim using the cost of replacing destroyed apples, rather than the cost of producing them, although it is possible no further repayment is needed under this approach.

The fire in January 2019 damaged a storage shed and its contents, and the insurer paid $447,672 for 1388 bins holding apples and 200 empty bins.

The farmer disputed both the number of bins covered and how the fruit was valued.

The orchard owner’s stock records were destroyed in the fire, making it difficult to establish the extent of his loss. He relied on spreadsheets recording the harvest, along with photographs, expert reports and witness statements.

AFCA notes the farmer and insurer “have exchanged a large volume of documents regarding how many bins were in the storage shed at the time of the fire and what quantity were filled with apples”.

It accepts the loss of records could explain inconsistencies in the farmer’s calculations, but says he still had to establish the amount of his loss.

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It is not persuaded more than 1388 bins of fruit were destroyed, finding the available evidence did not reliably establish how many apples were in one room of the shed.

But it says the insurer undercounted the overall number of bins. It concludes 2134 were in the shed, rather than the 1588 allowed for in the settlement. It has ordered IAG to pay a further $67,491 for the additional 546 bins, plus delivery costs.

The insurer valued the 1388 bins of apples at $160 each, or $222,080, based on production costs. AFCA says this was inconsistent with the policy, which covered the replacement value of destroyed property.

The insurer and farmer must each obtain a quote from a wholesaler or farmer for 1388 bins of apples suitable for juicing. The payout will be based on the average of the two quotes, less the $220,080 already paid for the apples.

If the average is below that amount, the insurer need not pay more, but it cannot recover any overpayment.

See the full ruling here.