AIG Insurance Tangle Over Vacant Property Break-In Unravels
AIG Insurance Tangle Over Vacant Property Break-In Unravels
The information on this website is general in nature and does not take into account your objectives, financial situation, or needs. Consider seeking personal advice from a licensed adviser before acting on any information.
A landlord initially seeking compensation of $102,270 for theft and repair costs following a break-in at a vacant commercial property was awarded $45,724 after a protracted insurance dispute with AIG Australia.
The issue revolved around discrepancies over a premium for an unoccupied building.
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.
Please Note: We do not endorse any specific products or companies. Some content is sourced from third parties, including press releases, and may not be independently verified for accuracy or completeness.
The Australian Prudential Regulation Authority (APRA) has released a pivotal report highlighting the pressing need for immediate and substantial action to shield communities from the escalating impacts of extreme weather events. This Insurance Climate Vulnerability Assessment (ICVA) serves as a stress test, modelling potential future scenarios rather than forecasting specific outcomes. However, the risks outlined are already becoming evident, reinforcing the insurance industry's calls for urgent intervention to mitigate extreme weather risks. - read more
In recent weeks, major Australian insurers such as Insurance Australia Group (IAG), Suncorp (SUN), and QBE Insurance (QBE) have experienced notable declines in their stock prices. This downturn is largely attributed to growing investor concerns about the potential disruption posed by artificial intelligence (AI) within the insurance sector. - read more
Recent research indicates that Australian insurers are trailing their global counterparts in preparedness for emerging risks, particularly those associated with artificial intelligence (AI) and cyber threats. This preparedness gap has reached its widest point in four years, raising concerns about the industry's ability to manage these rapidly evolving challenges. - read more
Workers' compensation insurance is a form of insurance that provides financial protection for businesses and their employees in the event of workplace injuries or illnesses. It ensures that workers receive the necessary medical treatment and compensation for lost wages if they are hurt on the job. - read more
Public liability insurance is a type of coverage designed to protect you in the event that a member of the public is injured or their property is damaged because of your business activities. It's essential for tradespeople whose everyday work involves interacting with clients and the public—or working in environments where accidents could happen. - read more
Specialized insurance for tradespeople is a form of tailored insurance coverage designed specifically to meet the unique needs and risks that professionals in various trades encounter. This includes trades such as electricians, plumbers, carpenters, and other similar occupations. - read more
Knowledgebase
Grace Period: A set amount of time after the premium is due during which a policyholder can make a payment without the insurance coverage lapsing.
