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.
In a recent joint CEO roundtable, the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC) highlighted pressing concerns regarding Total and Permanent Disability (TPD) insurance. The discussion centered on the escalating frequency and complexity of mental health-related claims, which are exerting significant pressure on both insurers and policyholders. - read more
The 2026-27 Federal Budget, presented by Treasurer Jim Chalmers, introduces several measures with direct implications for Australia's insurance sector. Notably, the budget addresses concerns related to property insurance costs and the issue of underinsurance, both of which are critical for tradespeople and small business owners. - read more
The Australian Competition and Consumer Commission (ACCC) has granted approval for Zurich Financial Services to acquire ClearView Wealth, a transaction valued at approximately $425 million. This decision follows a comprehensive assessment of the potential impact on competition within the Australian life insurance market. - read more
For tradespeople, tools and equipment are the backbone of their daily operations. From basic hand tools to advanced machinery, having the right gear is crucial for delivering quality work and maintaining efficiency. - read more
Public liability insurance is a type of cover that protects businesses and their owners from the financial risks of liabilities that may occur due to damage or injury to a third party. For tradies in Australia, this insurance is crucial due to the nature of their work environment. Working on various sites and handling different tasks increases the likelihood of accidents happening, which makes this type of insurance not only relevant but essential. - read more
Running a small trade business in Australia involves various risks, from accidental property damage to unexpected injuries on the job. These unforeseen events can lead to significant financial losses, which might be challenging for smaller enterprises to absorb. That's where comprehensive insurance comes into play. - read more
Knowledgebase
Insurable Interest: A financial or other kind of interest in the insured item or person, necessary for a valid insurance contract.
No comments yet. Be the first to share your thoughts.