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Determination
Case number | 12-00-1041605 |
Financial firm | AIG Australia Limited |
Case number: 12-00-1041605 23 September 2024
The complainant held a business insurance pack policy (policy) with the financial firm (insurer) insuring a commercial building rental property.
On 18 July 2023, the complainant lodged a claim with the insurer for loss and damage caused by thieves breaking into the property via a security gate on 15 July 2023. The insurer declined the claim because it says the insured situation (situation) remained unoccupied for more than 90 consecutive days, which is excluded under the policy.
The complainant disagrees and believes the insurer should cover the theft and malicious damage related repairs at a cost of $102,269.85. The complainant is represented by its broker ‘C’. Reference to the complainant includes both C and the complainant unless specified otherwise.
No. On a strict application of the terms of the policy, the insurer would not be liable for the loss and damage claimed, given the insured situation had been unoccupied for over 90 consecutive days at the time of the loss.
However, section 54 of the Insurance Contracts Act 1984 (Act) assists the complainant in this case. This is because, the insurer has not shown the extent of its prejudice is equal to being able to limit its liability under the policy to nil. Rather, it is fair to accept the extent of the insurer’s liability, in this instance, is the additional premium that would have been applied to the policy had the complainant informed the insurer of the situation being unoccupied.
The outcome is fair because although the policy seeks to exclude loss or damage arising from circumstances where a situation is unoccupied for over 90 consecutive days, there exist exceptions to this exclusion. The policy and relevant underwriting guidelines allow for an unoccupied situation to be covered subject to additional premium and conditions, which the information indicates would have been accepted by the insurer had the complainant informed it the situation was unoccupied. Therefore, it is fair that the insurer be required to accept the claim subject to charging the additional policy premium and the conditions.
1.3 Determination
This determination is in favour of the complainant.
The insurer is to accept the claim subject to the additional premium and policy conditions as provided in section 2.1 of this determination.
No. The insurer has not shown an entitlement to decline liability for the loss and damage claimed. Subject to the insurer charging the applicable policy premium and additional policy conditions, the insurer is to accept the claim in line with this determination.
Policy covers accidental loss or damage to situation
The policy includes cover for accidental physical loss of or damage to the situation, including theft, during the period of Insurance. There is no dispute the insurer provided the complainant with the relevant policy documentation including the product disclosure statement (PDS) and certificate of insurance (COI). I am satisfied the insurer is entitled to rely on the policy provisions to assess its liability under the claim.
The complainant is first required to show, it is more likely than not, that the loss or damage claimed triggers cover under the policy. Only if the complainant can do this, will the duty shift to the insurer to show, on balance, it is entitled to decline cover in line with the policy wording or otherwise.
There is no dispute the loss and damage claimed was caused by a malicious damage and theft event during the period of insurance, this being an event that triggers cover under the policy. Accordingly, the onus shifts to the insurer to show it is entitled to decline liability for the loss or damage in line with the policy or otherwise.
Policy excludes loss and damage if the situation is unoccupied for over 90 days
The insurer says it is entitled to decline the claim because the situation remained unoccupied for over 90 consecutive days prior to, and at the time of the event giving rise to the claim. The insurer says this is excluded under the policy. The relevant policy terms are set out in in section 3.2 of this determination.
The policy defines unoccupied to mean when the situation is left vacant by the complainant or any other person authorised by the complainant to occupy the building, whether furniture or other contents remain or not. I am satisfied the available information shows:
Information shows insured situation remained unoccupied for over 90 days
I acknowledge the complainant’s opinion that the insured situation remained partially occupied because:
Further, that given the event occurred on the weekend when the situation would have been unoccupied, even when tenanted, it is not fair for the insurer to decline the claim.
I am not of the same opinion and accept the available information shows the situation was unoccupied, as defined in the policy, for greater than 90 consecutive days, including the date of loss of 15 July 2023. I am not satisfied the fact the managing agent visited the location or drove past it daily can reasonably be accepted to render the situation occupied, partially or otherwise.
The available information shows that C contacted both the managing agent and the complainant regarding updating the insurer about the situation and the impact this may have on potential future claims against the policy. Further, that there existed the option to update the insurer of the circumstances and request for a higher level of cover for additional premium. The complainant chose not to apply for the higher cover or update the insurer about the situation.
Section 54 of the Act is engaged to assist complainant
It is relevant to consider whether section 54 of the Act applies to assist the complainant in this case. The objective of section 54 includes striking a fair balance between the interests of the insurer and the insured with respect to a contractual term designed to protect the insurer from an increase in risk during the period of insurance cover.
Section 54(1) is engaged when the doing of an act or the making of an omission would excuse an insurer from an obligation to pay a claim for a loss actually suffered by an insured. The relevant act or omission may be by the insured or another person, but it must happen after the contract of insurance was entered into.
Once section 54(1) is engaged, then the application of section 54(2) needs to be considered. Under section 54(2) it is necessary to establish whether the act or omission could reasonably be regarded as being capable of causing or contributing to the loss.
I acknowledge the insurer’s view that the relevant ‘act’ for the purpose of section 54 is the complainant leaving the insured situation unoccupied for more than 90 consecutive days, however, I am not of the same view.
I consider the relevant ‘act’ was the complainant’s failure to contact the insurer requesting its written consent confirming acceptance to continue to cover the situation whilst it remained unoccupied.
Under section 54(2) of the Act, an insurer is entitled to refuse payment if the act could reasonably be regarded as being capable of causing or contributing to the loss. I am not of the view that the complainant’s failure to request the insurer’s written consent for continued cover of the situation in the circumstances can reasonably be regarded as being capable of causing or contributing to the malicious damage and theft event on 15 July 20203.
Given section 54(2) of the Act does not apply, then section 54(1) does. 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.
Insurer can reduce liability by additional premium and conditions
I am satisfied, and in the absence of any persuasive information to the contrary, the available information shows that had the complainant contacted the insurer requesting its written consent confirming continued cover for the unoccupied situation (from 16 May 2023 onwards), the insurer would have provided such consent subject to an additional premium payment and conditions. Further, I am satisfied it is fair to accept that cover would not have been offered/extended past expiry of the policy on 16 January 2024, if the insured situation remained unoccupied at the time, which appears to be the case.
Therefore, I accept the extent of the insurer’s prejudice in this instance is the additional policy premium it would have charged the complainant to continue cover for the unoccupied situation from 16 May 2023 to 16 January 2024. Having reviewed the additional conditions, the insurer would have applied as part of such consent, I am satisfied these conditions were reasonably met and/or can be met by the complainant.
The claimed loss amounts to $102,269.85 that is based on a scope of works and repair estimate from consultant ‘J’ (appointed by the insurer) and locksmith ‘K’s tax invoice. The insurer has confirmed that the amount of additional premium that would apply in the circumstances is $56,545.74.
Accordingly, I am satisfied it is fair that within 14 days of receiving notice of the complainant’s acceptance of this determination, the insurer is to pay the complainant $45,724.11 less any other applicable policy deductions such as the policy excess.
The insurer is to pay interest on this cash settlement in line with section 57 of the Act, from 11 October 2023 to the day on which the cash settlement is paid.
The outcome is fair because although the policy seeks to excludes loss or damage arising from circumstances where an insured situation is unoccupied for over 90 days, there exist exceptions to this exclusion. The policy and relevant underwriting guidelines allow for an unoccupied situation to be covered subject to additional premium and conditions, which the information indicates would have been accepted by the insurer had the complainant informed it the situation was unoccupied. Therefore, it is fair that the insurer be required to accept the claim subject to charging the additional policy premium and the conditions imposed under its underwriting guidelines.
AFCA has determined this complaint based on what is fair in all the circumstances, having regard to:
The respective parties have completed a full exchange of the relevant information, and each party has had the opportunity to address any issues raised. We have reviewed and considered all the information the parties have provided.
While the parties have raised several issues in their submissions, we have restricted this determination to the issues that are relevant to the outcome.
AFCA is not a court of law. We do not have the power to take or test evidence on oath, or to require third parties to give evidence.
When we assess complaints, we consider:
We give more weight to documents created at the time the events occurred. If there are no relevant documents, we will decide what most likely occurred based on the available information.
If there are conflicting recollections and these are evenly weighted, we may find that a claim cannot be established.
12. Unoccupancy
This Policy does not cover any loss, damage, injury, destruction, claim, liability, cost or expense of whatsoever nature directly or indirectly caused by, in connection with, contributed to by, resulting from or arising out of the Situation being unoccupied for more than 90 consecutive days. Unoccupied means left vacant by You or any other person authorised by You to occupy the Building at Situation whether furniture or other contents remain or not.
This exclusion will not apply if:
(a) You notify us that the Situation will be unoccupied for more than 90 consecutive days; and
(b) we agree in writing to continue Your cover and You agree to:
(i) pay us any additional premium that we may require; and
(ii) changes in Policy terms and conditions we may require.
This exclusion does not apply to damage caused by:
(c) lightning, earthquake, volcanic eruption, tsunami and subterranean fire;
(d) impact by road Vehicle or their loads, animals, trees or branches, meteorite, Aircraft or other aerial devices or articles dropped from them, sonic boom or space debris, falling communication masts, towers, antennae or dishes, falling Building or structures or parts thereof which do not belong to You;
(e) riots, civil commotions and strikes.
