AFCA determinations public reporting

Determination

Case number	1016388
Financial firm	Allianz Australia Insurance Limited

Case number: 1016388 16 May 2024

Determination overview
1. Complaint

The complainant held a home and contents insurance policy with the financial firm (insurer). He lodged a claim on 1 April 2023 for the total loss of his house due to a fire.

The insurer declined the claim and cancelled the policy because it said the complainant had failed to comply with his duty to take reasonable care not to make a misrepresentation. It says the complainant misrepresented that he was an owner-occupier when he purchased the policy. The insurer says it would not have offered the insurance if the complainant had provided the correct information about occupancy. In addition, the insurer says the policy excludes loss where the insured property was unoccupied for more than 60 consecutive days.

The complainant says he accurately represented himself as an owner-occupier and the insurer has not shown the property was unoccupied for more than 60 consecutive days. He seeks that the insurer reinstate the policy and cover the claim.

Issues and key findings

Did the complainant breach his duty?

No. The insurer has not established that the complainant made a misrepresentation regarding his occupancy of the property at inception or renewal. Therefore, the complainant has not breached his duty to take reasonable care not to make a misrepresentation.

Is the insurer entitled to decline the claim and cancel the policy?

The panel does not consider there has been a relevant failure and, therefore, the insurer is not entitled to cancel the policy. There is also insufficient information to establish that the property was unoccupied for more than 60 consecutive days. Therefore, the insurer has not established that the occupancy exclusion applies. Accordingly, the insurer must accept the claim in accordance with the terms and conditions of the policy.

Why is the outcome fair?

The insurer has not shown there was a breach of the duty by the complainant. Therefore, it is fair that the insurer reinstates the policy. The insurer also has not established that any policy exclusion applies. Therefore, it is fair the insurer covers the claim.

Determination

This determination is in favour of the complainant.

Within 14 days of the complainant’s acceptance of this determination, the insurer must:

reinstate the policy. Any premium refunded is to be once again paid to the insurer; and
accept the claim in accordance with the terms and conditions of the policy. If the complainant is not satisfied with how the insurer settles the claim, and this cannot be resolved between the parties, the complainant is entitled to lodge a new complaint.

Reasons for determination

Did the complainant breach his duty?

Insurer has the onus of proof

The complainant’s policy was purchased on 10 February 2022 and renewed on 10 February 2023. There is no dispute the policy was obtained wholly, or predominantly, for his personal purposes. Therefore, the policy is a ‘consumer insurance contract’ as defined by the Insurance Contracts Act 1984 (Act).

As a result, the complainant had a duty to take reasonable care not to make a misrepresentation (duty) when purchasing and/or renewing the policy. This is set out in section 20B of the Act.

To refuse to pay a claim on this basis, the insurer must be able to at least show:

the complainant made a misrepresentation;
the complainant did so by failing to take reasonable care – section 20B of the Act; and
that it has been prejudiced by this failure – section 28 of the Act.

Insurer says the complainant misrepresented himself as an owner-occupier

The complainant purchased the policy online. During the online application process, the insurer asked whether the home would be permanently occupied from the day the insurance was due to start, to which the complainant answered ‘yes’. Based on the information provided, the insurer agreed to issue the policy.

At renewal, the insurer directed the complainant to check the details on the certificate of insurance and contact it to make any changes or corrections. The certificate again showed the property was ‘permanently owner occupied’ and ‘normally occupied during the day’. Based on the recorded information, the insurer agreed to renew the policy.

The insurer carried out an investigation following the lodgement of the claim. It says the complainant made a misrepresentation because he did not live at the insured property at the time of inception or at renewal. Based on this, it declined the claim.

The insurer relies on the complainant’s interview with the its external investigator (which took place with the assistance of a translator) where the complainant stated:

at the time of the fire, the complainant was at a monastery;
at the time of the interview, he was living at the monastery;
he had lived at the monastery for approximately two years; and
nobody had stayed at the property between December 2022 and the fire in March 2023.

The insurer also relies on:

its investigator’s summary report of what it was told by the complainant’s neighbour although no statement was obtained by the investigator; and
electricity invoice records from 21 October 2021 to 18 August 2022 which they say show no one resided at the property for an extended period of time.

The insurer’s underwriting department confirmed in a statutory declaration that the property was an unacceptable risk due to it being unoccupied for more than 60 consecutive days. It says if the complainant had advised the property was unoccupied, the insurer’s system would not have allowed the application to proceed online without underwriting review. Based on its underwriting guidelines, the insurer would not have issued the policy to the complainant.

Complainant says stating he was an owner-occupier is not a misrepresentation

The complainant says that when he purchased and renewed the policy he was the owner-occupier of the insured property. He maintains the information he provided was correct. He says the property was his only place of residence and, therefore, it was not unoccupied. On this basis, he says there was no misrepresentation and the insurer had no reason to decline the claim or cancel the policy.

The complainant’s first language is not English and the panel is satisfied that he requires a translator. He has explained the statements about occupancy in the interview were misunderstandings based on errors in translation. The complainant acknowledged he ‘started to stay 3 or 4 days a week at the monastery’ but was at his residence ‘every weekend or middle of the weekdays all the time’. The complainant accounted for the other miscommunicated statements as below:

that he had known of rather than resided at the monastery for two years; and
that no one other than himself and occasionally his family was living at the house between December 2022 and the fire in March 2023 rather than nobody was living there at all.

To support his occupancy, the complainant provided a letter from the monastery’s abbot. It states that the complainant had visited regularly for almost two years, attended monthly four-day retreats, helped with daily work and occasionally stayed the night. However, the complainant ‘was not a permanent resident at our monastery…we only have Buddhist monks who stay here permanently. We do not give residence to lay-people to stay at our cent[re]. Due to the recent tragic events, [the complainant] has lost his home. He kindly asked if he could stay at our cent[re]…He has helped our cent[re] in many ways…and hence, we have given temporary accommodation to’ him.

The complainant has also submitted documentation to support his occupancy, including:

electricity invoices with his name and the address of the insured property;
council rates notices for the insured property;
a property transfer statement for the insured property from 2021;
an affidavit from his ex-wife stating he resided at the insured address and his son visited him there;
an affidavit from his neighbour, JS, stating that he ‘was occupying his house across from [her] weekends painting + gardening putting up a fence prior the fire he was there on [weekend] of 25gh March putting hard rubbish out + general clean up’;
post-knee surgery health care plan in 2022 for the complainant at the insured address;
a letter from his usual doctor confirming he was a regular patient from 2021 with the listed address;
photos of the complainant and his family at the property in September, October and November 2021, January, February, May, October and November 2022 and January and March 2023; and
an affidavit from him which states, amongst other things, that he purchased the property in 2021, repainted the house and carried out various maintenance, renovated the kitchen in about September 2022 and generally occupied the property. He also says his children came and stayed with him during school holidays.

Insurer has not provided sufficient evidence regarding occupancy

The panel acknowledges the insurer’s concerns about the complainant’s occupancy based on the initial telephone interview. However, the complainant did attempt to correct the miscommunication as soon as he became aware of the question over occupancy.

The insurer acknowledges the complainant’s explanation of the miscommunication. It responded that it relied on his initial interview, rather than later contradictory information, because the statements made in the interview were more contemporaneous and made prior to the claim denial. Therefore, it considered they were likely to be more accurate. It also referred to the complainant stating on multiple occasions during claim lodgement and assessment that he was not living at the insured property and he had not done so for more than 60 days.

The insurer also provided a summary of a second interview conducted with the complainant after the claim outcome was provided. There is no transcript available for the second interview. However, the insurer says the complainant said he never stays at the premises after occasional visits to mow the lawn. The summary also refers to the investigator’s conversation with the complainant’s neighbour and reports that the neighbour said:

the complainant and his children last stayed at the property in January 2023 in the school holidays; and
the complainant does not attend the property regularly to mow the lawns.

The panel has carefully considered the information provided by the insurer.

The panel notes in relation to the interview that:

reading the transcript in the knowledge that the complainant resided at the monastery after the fire and at the time of the interview, which is not disputed, accounts for some errors in understanding the complainant’s statements;
the complainant’s statement that he was at the monastery on the day of the fire cannot reasonably be taken to indicate he resided there permanently;
similarly, his report of temporary residence at the monastery after the fire is insufficient to conclude that he had resided there before the fire;
in the context of a translated interview, it is reasonable that intended and actual meaning could be lost, including that no one was living at the property meant no one other than the complainant; and
when asked ‘And how long have you lived there for?’ it is reasonable that the complainant may have understood ‘there’ to be referring to the insured property not the monastery. His answer of two years accords with when he purchased the property.

Further, the complainant stated in the interview that:

the house was fully furnished;
his children sometimes stayed with him at the property;
his drivers licence lists his address as the insured property;
he knew his neighbours at the insured property and had their telephone number. Also, it was they that informed him about the fire;
he mowed the lawns at the property every two or three weeks; and
he disposed of some hard rubbish from the property a week or so before the fire.

Given this, the complainant had no reason to suspect a claim denial on the basis that the property was unoccupied/he was not an owner-occupier until he received the claim outcome on 21 July 2023. He raised the miscommunication the following day by phone with the assistance of a friend as translator. The complainant’s view is that he clarified the incorrect facts, rather than gave two alternative versions of events. Given this, the contemporaneity of the complainant’s initial statements during the interview is less relevant.

The panel is also not persuaded by the investigator’s summary of the second interview. In the absence of a transcript, the statements cannot be read in context and verified. The report of a discussion with the neighbour is also not persuasive in the absence of a written statement.

On balance, complainant has not made a misrepresentation

The onus is on the insurer to establish that the complainant has made a misrepresentation.

Other than the initial interview with the investigator, there are no direct statements by the complainant which suggest that he was not living at the insured property. The earliest reference in the claim notes to the complainant not occupying the property is on 27 April 2023 being after the investigator’s interview and update to the insurer. The subsequent claims notes are repetitions from the interview, rather than independent corroborations.

In terms of the investigator’s summary on what the complainant’s neighbour said, this is not conclusive of inoccupancy. Further, the same neighbour later provided a written statement confirming the complainant’s occupancy. This raises concerns about the reliability of information from that source.

Conversely, the panel considers the complainant’s supporting evidence is reasonably comprehensive in indicating that for governmental, medical and personal purposes, he permanently resided at the property. The panel acknowledges some individual records are less persuasive in isolation. However, the below average electricity use in the invoices is not conclusive proof of inoccupancy either. Average use may not reflect the complainant’s daily activities. Also, considering his habit of attending a meditation retreat. Arguably the pattern of consumption in the records indicate he was a regular low level user.

Further, the complainant’s ex-wife has provided an affidavit confirming his occupancy and there are also photographs confirming his family visited the insured property.

Moreover, the panel considers the letter from the monastery’s abbot is a credible and authoritative statement that the complainant did not reside at the monastery. Given the insurer posited that location as the complainant’s alternative place of residence, in the absence of another explanation of where he resided or information to the contrary, the panel considers the insured did not reside at the monastery. The panel notes the apparent contradiction in the letter about not providing permanent residency for a lay-person yet permitting the complainant to reside at the monastery after the fire. However, the abbot accounts for this in referring to the circumstances of the tragic loss of the complainant’s home and that it is only temporary accommodation and does not state that the complainant’s residence is permanent.

Overall, there is insufficient information to conclude, on balance, that the complainant did not occupy the property in the policy period. Taking the complainant’s explanation of the misunderstandings in the interview together with his supporting evidence, the panel does not consider there is sufficient information to conclude that the complainant has made a misrepresentation.

Accordingly, the panel is not satisfied that the complainant breached his duty to take reasonable care not to make a misrepresentation.

Is the insurer entitled to decline the claim and cancel the policy?

Insurer must reinstate the policy as there has been no misrepresentation

As stated above, the panel does not consider there has been a misrepresentation made by the complainant regarding occupancy of the insured property. Accordingly, there has not been a ‘relevant failure’ as defined in section 27AA of the Act.

In the absence of such a relevant failure, the insurer cannot rely on section 60 of the Act to cancel the complainant’s policy. Therefore, under section 63 of the Act, the insurer’s cancellation of the policy is of no effect. The insurer is required to reinstate the policy.

Further, the complainant must pay the premium for the relevant policy period including repaying the premium which may have already been refunded.

The insurer is also required to remove from its records, and the records of any organisation with whom it has communicated, any reference to the cancellation of the policy and the denial of the claim based on misrepresentation.

Once policy is reinstated, complainant has onus to establish a claimable loss

The complainant is required to show, on the balance of probabilities (that it is more likely than not), that there is a claimable loss under the policy. This means the complainant must prove the loss or damage was caused by a risk that is covered under the policy.

Once the complainant proves there is a claimable loss, the insurer is liable for the loss unless it shows an exclusion or limiting condition applies. The insurer has the onus of proving, on the balance of probabilities, that the exclusion or condition applies.

Policy covers damage from fire subject to exclusions

The insurer’s policy consists of the policy schedule and product disclosure statement (PDS). It is not in dispute the insurer provided the policy documents to the complainant.

The policy is an ‘insured events’ policy. This means not all loss and damage is automatically covered. Rather, only loss or damage caused by an insured event, and not subject to an exclusion, is covered. The insured events are set out in the PDS and include fire or smoke.

However, the policy generally excludes cover for damage which is caused by, amongst other things:

(occupancy exclusion)

Insurer says the property was unoccupied for 60 days

The insurer says the property was unoccupied for at least 60 consecutive days and that the occupancy exclusion above applies.

The submissions in relation to the occupancy exclusion are based on the same information as the information outlined above in relation to the duty to take reasonable care not to make a misrepresentation.

The key information referred to by the insurer is the complainant’s statements in the interview that he resided at the monastery rather than the insured property and that nobody stayed there between December 2022 and the fire in March 2023.

Insurer has not established, on balance, that exclusion applies

The panel is satisfied that a fire caused the house to burn down. Therefore, the complainant has established a claimable loss.

Under the policy, the building is ‘lived in’ when the insured or a nominated person has been living in the home for at least two consecutive nights. In this regard, the complainant’s explanation of the misunderstandings about his initial interview applies equally to the issue of whether the property was ‘lived in’ as it does to consideration of his duty to take reasonable care not to make a misrepresentation.

Further, the complainant has provided various evidence including a statement from the monastery’s abbot. The statement says there were ‘occasional’ overnight stays and monthly four-day retreats but that the complainant never permanently resided at the monastery. Given this, the panel accepts there is sufficient information to show the complainant lived in the home for at least two consecutive nights. This means the insurer should consider the property was lived in. The onus therefore shifts to the insurer to establish that the occupancy exclusion applies.

The insurer relies on the initial interview with the complainant (which has already been discussed), the summary from the investigators of the second interview and neighbour’s comments (which were later contradicted by a statement from the same neighbour) and electricity invoices. On balance, the panel considers there is insufficient information to establish that the property was unoccupied for more than 60 consecutive days. Further, the panel considers it is more likely than not that the complainant did live in the property.

Therefore, the insurer is not entitled to rely on the occupancy exclusion to exclude the claim. The panel considers it is fair in the circumstances for the insurer to accept the claim in accordance with the terms and conditions of the policy.

Why is the outcome fair?

Supporting information

The AFCA process

AFCA’s approach is based on fairness

AFCA has determined this complaint based on what is fair in all the circumstances, having regard to:

the legal principles
applicable industry codes or guidance
good industry practice
previous decisions of AFCA or its predecessor schemes (which are not binding).

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 of the information the parties have provided.

While the parties have raised a number of issues in their submissions, we have restricted this determination to the issues that are relevant to the outcome.

A panel determined this matter

Due to the nature of this complaint, we referred it to a panel for determination. The panel includes:

an ombudsman
a member with significant experience in consumer and small business advocacy
a member with extensive experience in the insurance sector.

We assess complaints on available information and circumstances

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:

available documents
the recollections of the parties
all relevant circumstances.

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.

Policy wording

Page 15 Changes to your details

You must tell us as soon as reasonably possible if, during the period of insurance: […]

• your home building has not been lived in (or will not be lived in) for more than

60 consecutive days

! If you don’t provide this information as soon as reasonably possible, we may refuse or reduce a claim under the policy to the extent we are prejudiced by the delay or the non-disclosure […]

When your home buildings are not being lived in.

We consider your home buildings not lived in when no one is living there. We consider the home buildings lived in when you or someone nominated by you have been living in the home buildings (eating and sleeping) for at least two consecutive nights. You may not be covered under this policy if your home buildings are not lived in for more than 60 consecutive days unless you have our prior agreement in writing.

We may (acting reasonably) ask you to prove that the home buildings are lived in, in the event of a claim.

Page 16 Fire

In return for paying or agreeing to pay us your premium, the policy covers loss or damage to your buildings and/or contents caused by one or more of the following insured events that take place during the period of insurance. […]

Fire or smoke (including bushfires and grassfires)

What’s covered?

Buildings and/or contents

✔ Loss or damage caused by:

• fire [...]

Pages 53, 56 General exclusion

Things we won’t cover

We want to be clear about what you’re covered and not covered for. In addition to any other exclusions listed for an event or cover section – here’s a list of things we won’t cover under any section of the policy. […]

Excluded unless your policy specifically allows it

Unless we state differently in your policy or policy schedule, we will not pay for loss, damage […] as a result of, caused by, or arising from: […]

Any claim while your home buildings are not lived in for more than 60 consecutive days

Loss, damage or theft if the buildings have not been or will not be lived in for any period in excess of 60 consecutive days, unless you have our prior agreement in writing. We will not unreasonably withhold our agreement.

Relevant legislation

Insurance Contracts Act 1984 (Cth)

Section	Terms
20B – The insured’s duty to take reasonable care not to make a misrepresentation	Subject to this Act, an insured has a duty to take reasonable care not to make a misrepresentation to the insurer before the relevant contract of insurance is entered into. Whether or not an insured has taken reasonable care not to make a misrepresentation is to be determined with regard to all the relevant circumstances. Without limiting subsection (2), the following matters may be taken into account in determining whether an insured has taken reasonable care not to make a misrepresentation: the type of consumer insurance contract in question, and its target market explanatory material or publicity produced or authorised by the insurer; how clear, and how specific, any questions by the insurer of the insured were; how clearly the insurer communicated to the insured the importance of answering those questions and the possible consequences of failing to do so; whether or not an agent was acting for the insured; whether the contract was a new contract or was being renewed, extended, varied or reinstated. Any particular characteristics or circumstances of the insured of which the insurer was aware, or ought reasonably to have been aware, are to be taken into account in determining whether an insured has taken reasonable care not to make a misrepresentation. …
20C – Warranties of existing facts to be representations	A statement with respect to the existence of a state of affairs that is: made in or in connection with a contract of insurance; and made by or attributable to the insured; does not have effect as a warranty but has effect as though it were a statement made to the insurer by the insured during the negotiations for the contract but before it was entered into.
27AA – Meaning of relevant failure	In this Act, a relevant failure in relation to a contract of insurance is: if the contract is, or would be, a consumer insurance contract -- a misrepresentation made by the insured in breach of the duty to take reasonable care not to make a misrepresentation; …
28 – General insurance	… If the insurer is not entitled to avoid the contract or, being entitled to avoid the contract (whether under subsection (2) or otherwise) has not done so, the liability of the insurer in respect of a claim is reduced to the amount that would place the insurer in a position in which the insurer would have been if the relevant failure had not occurred.
60 – Cancellation of contracts of general insurance	Where, in relation to a contract of general insurance: … there was a relevant failure; … the insurer may cancel the contract.
63 – Cancellation of contracts of insurance void	(1) Except as provided by this Act, an insurer must not cancel a contract of general insurance. … (3) Any purported cancellation of a contract of insurance in contravention of subsection (1) or (2) is of no effect

Name	Start Time	End Time
Townhall	7/29/2024 10:30:00 PM	7/30/2024 12:30:00 AM
Townhall Oct 24	10/16/2024 8:00:00 PM	10/16/2024 10:00:00 PM

Name	Start Time	End Time
Friday	09:00	17:00
Monday	09:00	17:00
Thursday	09:00	17:00
Tuesday	09:00	17:00
Wednesday	09:00	17:00