AIG Insurance Tangle Over Vacant Property Break-In Unravels
AIG Insurance Tangle Over Vacant Property Break-In Unravels
1
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.
Published:Friday, 1st Nov 2024 Source: Paige Estritori
Please Note: If this information affects you, seek advice from a licensed professional.
Australia's insurance sector has reported a substantial after-tax profit of $6.1 billion for the year 2024, a figure that is three times higher than the five-year average of $2 billion. This significant increase in profitability coincides with notable hikes in insurance premiums across various categories. - read more
Many Australian consumers are experiencing substantial increases in their insurance premiums, often without clear explanations from their providers. Reports indicate that some policyholders have faced premium hikes of 30% to 50%, with instances of increases reaching several hundred percent. - read more
Homeowners in Northern Australia are encountering rising insurance premiums, despite the establishment of a cyclone reinsurance pool intended to reduce costs. The Australian Competition and Consumer Commission (ACCC) reports that median home and contents premiums in the Northern Territory increased by 11% during 2023. - read more
Public liability insurance is designed to protect businesses and tradespeople against legal costs and compensation claims for injury or damage to property by a third party. In layman's terms, it covers you if someone sues your business for damages. - 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
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
Knowledgebase
Coinsurance: A percentage of the cost of a covered healthcare service that you pay after you have paid your deductible.
