We are a proud member of the Financial Services Online network!
Connect with us on your favourite social media platform for the latest financial news, views, tips, tricks, resources and information.
The Australian Financial Complaints Authority (AFCA) intervened, reducing the payout by $56,546. This amount corresponds to the difference the landlord would have owed AIG in premiums to insure a building unoccupied for more than 90 consecutive days — an arrangement the landlord neglected, despite receiving clear directives from a broker.
The landlord, with guidance from their broker, had filed a claim last July after criminals gained access through a leased security gate, prompting AIG to refuse the claim due to the structure’s vacant status, which wasn't covered under the policy.
Prior to the unfortunate event, the broker had made the building owner and managing agent aware of the need to refresh AIG of the vacant situation, potentially affecting claims, and the possibility of acquiring extra coverage by adjusting the premium.
Despite the advice, the owner failed to take action, leading to AIG being notified about the vacancy only post-theft. AFCA indicated that AIG would likely have underwritten the unoccupancy risk had they been told, and determined it fair to authorize the claim — factoring in the supplemental premium and other conditions like an excess charge.
Section 54 of the Insurance Contracts Act became pivotal, with AFCA stating that the breach pertained to not informing the insurer of the decision to leave the property vacant beyond 90 days without seeking written permission — not merely the fact that the premises were left empty.
An AFCA official explained, “I am not of the view that the complainant’s failure to request the insurer’s written consent ... can reasonably be regarded as being capable of causing or contributing to the malicious damage and theft event.”
They emphasized, “The insurer cannot refuse to pay the claim by reason only of the post-contractual act, that is, by reason only of the complainant’s failure to seek its written consent. The insurer is, however, entitled to reduce its liability to the extent that it has been prejudiced.”
AFCA specified that AIG had not proved the extent of its disadvantage equaled its ability to completely dismiss its liability under the policy. Instead, AFCA accepted that the liability compared to the additional premium deemed appropriate if the vacancy had been disclosed.
Arguments suggesting partial occupancy, due to daily visits from a property manager and maintenance by contractors, were rejected, as was the claim that it was unjust to deny coverage because the theft transpired over a weekend when the premises would be unoccupied even if tenanted.
This information originally featured in an article in Insurance News Magazine.
Published:Friday, 1st Nov 2024
Source: Paige Estritori
| Life Insurance Takes Backseat in Cost-Cutting Measures 03 Dec 2024: Paige Estritori As Australians tighten their belts in the face of rising living costs, life insurance is rapidly being placed on the chopping block. The Council of Australian Life Insurers (CALI) reports that individuals are more likely to reduce life cover rather than home or car insurance. - read more |
| Call for Greater Transparency in Professional Indemnity Insurance 02 Dec 2024: Paige Estritori The Australian Financial Complaints Authority (AFCA) is advocating for enhanced transparency concerning the Professional Indemnity (PI) insurance maintained by member companies, highlighting its current lack of oversight regarding PI insurers. - read more |
| Senate Pushes for Transparency in Insurance Premiums 28 Nov 2024: Paige Estritori The Senate has called on the Australian Competition and Consumer Commission (ACCC) to adopt a more active role in monitoring insurance premiums. This comes as part of a broader recommendation advocating for insurers to enhance pricing transparency to assist consumers better understand their policies. - read more |
